FHA loan performance and adverse selection in mortgage insurance

Kevin A. Park

Journal of Housing Economics, 2016, vol. 34, issue C, 82-97

Abstract: Using propensity score matching and survival analysis, we examine the performance of FHA- and privately-insured home purchase mortgages relative to uninsured mortgages. Privately-insured loans are more likely to default than uninsured loans with comparable risk characteristics, indicating the presence of adverse selection. By contrast, loans insured by FHA are not more likely to default than similar uninsured loans. Hazard ratios for both insurance types fall when an adjusted rate spread variable, but does not eliminate the disparity between uninsured and privately-insured loans. On the other hand, privately-insured loans are less likely to prepay while FHA-insured loans are more likely to prepay relative to uninsured loans.

Keywords: Mortgage; Default; Insurance; Federal Housing Administration; Adverse selection (search for similar items in EconPapers)
JEL-codes: G22 G28 R3 R38 R51 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1051137716300080
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:34:y:2016:i:c:p:82-97

DOI: 10.1016/j.jhe.2016.07.004

Access Statistics for this article

Journal of Housing Economics is currently edited by H. O. Pollakowski

More articles in Journal of Housing Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().