The riskiness of outstanding mortgages in the United States, 1999 ‐ 2019

Working Papers prepared by staﬀ of the Federal Housing Finance Agency (FHFA) are preliminary products circulated to stimulate discussion and critical comment. The analysis and conclusions are those of the authors alone, and should not be represented or interpreted as conveying an oﬃcial FHFA position, policy, analysis, opinion, or endorsement. Any errors or omissions are the sole responsibility of the authors. References to FHFA Working Papers (other than acknowledgment) should be cleared with the authors to protect the tentative character of these papers. their and assembling a wonderful Fisher, Steve Oliner, and participants FHFA comments and encouragement. Abstract This paper introduces summary measures of credit risk for the stock of all outstanding mortgages in the United States for each quarter between 1999 and 2019. Mortgage terminations play a fundamental role in oﬀsetting risk introduced by the ﬂow of new originations because of reﬁnance activity and the often dual nature of home buyers as concurrent sellers. To illustrate these concepts in a policy setting, I show the Home Aﬀordable Reﬁnance Program increased origination risk metrics but reduced overall risk due to the associated terminations of even riskier loans. Generally, book-level risk tends to lag behind originations: while origination risk peaked in 2006, the risk of outstanding mortgages peaked in 2007, and while origination risk bottomed out in 2011 and has been rising since, book-level risk continued its downward trend in 2019. Other results highlight previously rarely-examined market segments, including credit unions, the Federal Home Loan Bank system, and loans guaranteed by the Farm Service Agency/Rural Housing Service.