Paper on FHA Lending During the Mortgage Crisis Includes Some Fair Housing Concerns as Future FHA Share Declines.

Paper is HERE. Some fair housing/redlining implications: 

Controlling for many other loan-level and zip code characteristics, the odds of a loan being FHA-insured increase substantially when going from a predominantly white to an otherwise similar predominantly black zip code.

...Given the “flight from risk” that private sector financial firms exhibited since the advent of the mortgage crisis, policymakers should be concerned that risk-averse lenders and PMI firms may reengage in the more traditional forms of redlining or lending discrimination that were common during a large part of the 20th century, when conventional lenders avoided minority neighborhoods and borrowers. Lenders and PMI firms may overreact and employ methods of credit distribution that work against certain types of regions, neighborhoods, or borrower groups...Unless another affordable and sound lending product is available to fill the gap left by any decline in FHA lending, a withdrawal of credit could further destabilize such markets and neighborhoods. Noninstitutional forms of credit, including very high-cost “hard money” lenders or land contract and rent-to-own schemes, are likely to proliferate and decreased effective demand for owner-occupied housing may be a significant outcome...The magnitude of the FHA role during the crisis, especially in areas experiencing property value declines, shows the importance of maintaining the agency and its ability to respond rapidly to crises, whether they are on a national or local scale.Without FHA lending, housing markets hit
hard by the mortgage and foreclosure crisis would have likely fared far worse, as conventional, GSE lenders and the associated PMI companies pulled back from such places.

Originally created and posted on the Oregon Housing Blog.