The Missing Loan-to-Value Cycle

We show that the equilibrium loan-to-value (LTV) distribution in the US mortgage market has been remarkably stable over the last quarter century, both in aggregate and region by region, despite large, cross-sectionally heterogeneous house price cycles. While high-LTV mortgages changed from being explicitly government backed to privately securitized and back, their overall fraction remained unchanged. A repeat-sales methodology and an analysis of loan performance confirm that this stability in the distribution of LTVs holds even within subgroups of the population. These findings are inconsistent with models of credit cycles that use changes in collateral constraints to generate boom-and-bust dynamics in house prices. (JEL C43, E32, G21, G51, R21, R31)