Abstract
Government-driven mortgage guarantee programs (for example, loans insured through the Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service) aim to help financially disadvantaged households buy and own their houses. This study analyzes the macroeconomic and distributional effects of these government programs. We propose a quantitative model where households endogenously choose their mortgage types either with or without government guarantees. Households that take out mortgages with government guarantees pay an up-front insurance premium, while those that choose mortgages without guarantees face borrowing limits. Our results show that a hypothetical decline in government subsidies for mortgage guarantee programs can improve aggregate household welfare, mainly due to endogenous changes in mortgage interest rates and tax burdens, rather than in housing prices. The welfare implications are different across households, depending on their financial status.
| Original language | English |
|---|---|
| Pages (from-to) | 124-151 |
| Number of pages | 28 |
| Journal | Journal of Economic Dynamics and Control |
| Volume | 87 |
| DOIs | |
| Publication status | Published - 2018 Feb |
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All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Control and Optimization
- Applied Mathematics
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Macroeconomic and distributional effects of mortgage guarantee programs for the poor. / Kim, Jiseob; Wang, Yicheng.
In: Journal of Economic Dynamics and Control, Vol. 87, 02.2018, p. 124-151.Research output: Contribution to journal › Article
TY - JOUR
T1 - Macroeconomic and distributional effects of mortgage guarantee programs for the poor
AU - Kim, Jiseob
AU - Wang, Yicheng
PY - 2018/2
Y1 - 2018/2
N2 - Government-driven mortgage guarantee programs (for example, loans insured through the Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service) aim to help financially disadvantaged households buy and own their houses. This study analyzes the macroeconomic and distributional effects of these government programs. We propose a quantitative model where households endogenously choose their mortgage types either with or without government guarantees. Households that take out mortgages with government guarantees pay an up-front insurance premium, while those that choose mortgages without guarantees face borrowing limits. Our results show that a hypothetical decline in government subsidies for mortgage guarantee programs can improve aggregate household welfare, mainly due to endogenous changes in mortgage interest rates and tax burdens, rather than in housing prices. The welfare implications are different across households, depending on their financial status.
AB - Government-driven mortgage guarantee programs (for example, loans insured through the Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service) aim to help financially disadvantaged households buy and own their houses. This study analyzes the macroeconomic and distributional effects of these government programs. We propose a quantitative model where households endogenously choose their mortgage types either with or without government guarantees. Households that take out mortgages with government guarantees pay an up-front insurance premium, while those that choose mortgages without guarantees face borrowing limits. Our results show that a hypothetical decline in government subsidies for mortgage guarantee programs can improve aggregate household welfare, mainly due to endogenous changes in mortgage interest rates and tax burdens, rather than in housing prices. The welfare implications are different across households, depending on their financial status.
UR - http://www.scopus.com/inward/record.url?scp=85044638805&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85044638805&partnerID=8YFLogxK
U2 - 10.1016/j.jedc.2017.12.005
DO - 10.1016/j.jedc.2017.12.005
M3 - Article
AN - SCOPUS:85044638805
VL - 87
SP - 124
EP - 151
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
ER -