Credit Rationing in the U.S. Mortgage Market: Evidence from Variation in FHA Market Shares

This paper examines the nature of mortgage credit rationing across geographic markets and time. Particular attention is paid to the response of conventional mortgage supply to higher risk conditions associated with regional recessions. We develop a series of four indirect tests based on the spatial variation of the FHA share of mortgages, both endorsements and applications, as well as FHA and conventional rejection rates. Results of these four tests indicate that conventional mortgage underwriting criteria do not become more flexible and may even become more demanding when local economic conditions deteriorate. This result indicates the use of non-price credit rationing in the mortgage market and suggests a special role for FHA-insured mortgages as a mechanism for maintaining mortgage credit supply in declining housing markets

In Harm's Way: Does Federal Spending on Beach Enhancement and Protection Induce Excessive Development in Coastal Areas?

Rapid economic growth along shorelines places property in harm's way because of exposure to storms, and has sparked debate about the government's role in attenuating the associated risks faced by beachfront property owners. This paper analyzes the effects of government shore protection activities. Additional development that takes place in shoreline areas because of shore-protection projects provides net social benefits, even when more property is placed in harm's way. Our empirical analysis shows, however, that growth in beachfront communities has been prompted mainly by rising income and employment in inland areas, rather than by public investments in shore protection.