Clear nonpartisan analysis of fiscal and tax policy enables policymakers and the public to weigh competing theories on how to end the country’s economic crisis. Urban Institute researchers evaluated key components of the stimulus package and analyzed the tax proposals in the president’s budget. Warning decisionmakers about the unsustainable fiscal course ahead, our experts propose ways to control deficits and reform the entitlement programs that drive up spending. Read more.
The 2014 actuarial assessment of the Federal Housing Administration’s main funding source for its loan insurance program – the Mutual Mortgage Insurance Fund (MMI)- reveals that the FHA’s financial situation is much improved but not as strong as last year’s predictions suggested it would be. This HFPC analysis lays out the methods used in the actuarial report and explains why the MMI’s current status should have no impact on the decision as to whether to lower premiums.
The heightened and uncertain cost of servicing delinquent mortgage loans is a significant, although underappreciated, constraint on access to credit. Lenders can price loans to reflect the anticipated servicing costs, but it is very difficult to price for the uncertain costs of default servicing. The penalties resulting from not meeting the GSE and FHA timelines, along with restrictive and anachronistic limits on reasonable foreclosure expenses, create uncertainties that are difficult to quantify and price for. The result: lenders forgo lending to borrowers more likely to go delinquent. The FHFA has made great strides with recent changes to compensatory fees, but more needs to be done. Servicing delinquent FHA loans presents an even greater challenge. To expand the tight credit box, these servicing issues must be addressed.
This month’s edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated indicators of credit availability, a breakdown of the composition of the US Housing Market from the Federal Reserve Flow of Funds report, and details of the latest GSE risk-sharing deals.
Puerto Rico eliminated its work tax credit (WC) in 2014. The credit, which was established in 2006, delivered benefits to 45 percent of all tax filers in 2013 at a total cost $124 million. The maximum credit was $450. This report assess the experience with the WC from 2007 to 2013 and suggests elements for a possible redesign that rewards and stimulates work, reduces hardship, strengthens the tax base, and offsets regressivity in ways that are consistent with current tax reform proposals in Puerto Rico.
The California State Teachers’ Retirement System has been grossly underfunded for the past decade. State policymakers have responded by cutting plan benefits for new hires and raising teachers’ required plan contributions. These changes, however, have undermined teachers’ retirement income security. Only 35 percent of new hires will receive pensions worth more than the value of their required plan contributions. Most new hires would have better financial outcomes if they could opt out of the mandatory retirement plan and invest their contributions elsewhere. Additional plan reforms should focus on changing the benefit formula to distribute pensions more equitably across the workforce.
The Housing Finance Policy Center’s new measure of the rate at which mortgage applications are denied – the real denial rate (RDR)– improves upon existing denial rate measures by considering only low-credit-profile applicants. The RDR better tracks trends in credit accessibility over time and reveals that the conventional channel has had a consistently tighter credit box over time than the government channel. The RDR also shows much smaller racial and ethnic distinctions in mortgage denial rates over time than are shown by the traditional measure.
High net worth investors can reduce the cost of an investment in 29 states by claiming an "angel investor" tax credit. In most states, the credit is worth more than 25 percent of the investments and can be transferred to another taxpayer if it exceeds the investor's liability. States hope the credit will develop high tech clusters and generate economic activity.
Homeowners and subsidized renters experience significantly lower material hardship than unsubsidized renters, even after taking account of income, income variability, race, education, and family structure. Homeownership conveys more protection against hardship than do rent subsidies. Using the Survey of Income and Program Participation, we estimate the likelihood of experiencing any material hardship is about 9.2 percent lower for subsidized renters and 24.5 percent lower for homeowners. Even homeowners who bought just before the recent crash in home prices experienced less hardship than unsubsidized renters. White, black, and Hispanic homeowners all suffer less material hardship than their renting counterparts (whether subsidized or unsubsidized). This reduction is most pronounced among Hispanic families.
This month’s edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated indicators related to credit availability and a special quarterly look at Fannie Mae’s and Freddie Mac’s loan composition, default rates, and repurchase activity.