The downs and ups of FHA lending: The government mortgage roller coaster ride

Throughout the last decade, mortgage markets experienced both a considerable decline and a considerable increase in the share served by the FHA. Concerns have grown about the solvency of the program and about the access to credit of the borrowers served by the FHA market. These concerns are due, at least in part, to the evolving distribution of loans in the FHA portfolio and uncertainty about future patterns of lending. This paper attempts to explain FHA lending patterns over the past decade, particularly the dramatic downs and ups of FHA lending. We pay particular attention to the drivers of these changes, and the implications of these changes for FHA lending, mortgage markets, and associated public policy initiatives.