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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Finance and Economics Discussion Series: The Government-Sponsored Enterprises and the Mortgage Crisis: The Role of the Affordable Housing Goals

Finance and Economics Discussion Series: The Government-Sponsored Enterprises and the Mortgage Crisis: The Role of the Affordable Housing Goals

Bolotnyy, Valentin
United States Federal Reserve Board

Paperback

General Political Science

ISBN10: 1288698070
ISBN13: 9781288698073
Publisher: Bibliogov
Published: Feb 4 2013
Pages: 36
Weight: 0.18
Height: 0.07 Width: 7.44 Depth: 9.69
Language: English
The U.S. mortgage crisis that began in 2007 generated questions about the role played by Fannie Mae and Freddie Mac, the Government-Sponsored Enterprises (GSEs), in its causes. Some have claimed that the Affordable Housing Goals (AHGs), introduced by Congress through the GSE Act of 1992, and the resulting purchases of single-family mortgages the GSEs made to meet those goals, drove lending to high-risk borrowers. Using regression discontinuity analysis, I measure the effect of one of the goals, the Underserved Areas Goal (UAG), on the number of whole single-family mortgages purchased by the GSEs in targeted census tracts from 1996 to 2002. Focusing additionally on tracts that became UAG-eligible in 2005-2006, when the Department of Housing and Urban Development (HUD) began to determine eligibility using the 2000 Census, I measure the effect of the UAG on the GSEs' whole single-family mortgage purchases during peak years for the subprime mortgage market. Under the first approach, I estimate that the GSEs purchased 0 to 3 percent more goal-eligible mortgages than they would have without the UAG in place. Under the second approach, I estimate this effect to be 2.5 to 5 percent. The results suggest a small UAG effect and challenge the view that the goals caused the GSEs to supply substantially more credit to high-risk borrowers than they otherwise would have supplied. Although the goals may have spurred the GSEs to purchase more multi-family mortgages and REMICs than they otherwise would have, my analyses suggest that the GSEs' purchases of whole single-family mortgages to satisfy the goals did not drive the subprime lending boom of 2002-2006.

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