Restricted Market


DEFINITION of 'Restricted Market'

A market which does not allow for a free-floating exchange rate, such as a region whose exchange rate is heavily controlled by the government and only partly influenced by general economic variables.

An example of a restricted market would be a currency that is pegged to another country's currency. A blocked currency market is more controlled than a restricted market, and a free market is less controlled. Restricted markets are not limited to currency, but include most types of market activities that are closely monitored and regulated.

BREAKING DOWN 'Restricted Market'

In the aftermath of the housing crisis of the late 2000s, the Mortgage Guaranty Insurance Corporation declared various cities and some entire states to be restricted markets for mortgage insurance because they considered them too weak/risky. These areas included the states of Arizona, California, Florida and Nevada and the cities of Honolulu, Detroit, Baltimore and Minneapolis, among many others.

This restriction meant that the company would not insure loans for greater than 95% of the property's value, loans for investment properties or cash-out refinances. Potential buyers needed to have at least a 5% down payment to take out a mortgage with a lender who obtained its private mortgage insurance through the Mortgage Guaranty Insurance Corporation. Other mortgage-insurance companies enacted similar restrictions.

  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  3. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  4. Minimum Down Payment

    The minimum cash contribution that must be made by a borrower ...
  5. Redlining

    The unethical practice whereby financial institutions make it ...
  6. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and ...
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  1. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  2. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  3. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  4. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  5. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
  6. Are FHA loans assumable?

    Loans insured by the Federal Housing Administration (FHA) on or after Dec. 15, 1989, are assumable by qualifying borrowers. ... Read Full Answer >>

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