Taking a look at the critical question of the extent to which interest-rate changes have their intended monetary-policy effect in the mortgage market, a new Federal Reserve paper reinforces the important adverse impact of high premiums – read also delivery fees – on housing equality.  Looking at the sudden cut in FHA premiums at the end of 2015 and isolating its impact for higher-risk, higher-LTV borrowers in FHA-likely neighborhoods, the paper finds that it was the premium cut – not lower rates – that spurred a demand spike without a corresponding price increase.

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