FHA, Fannie Mae, Freddie Mac, and the Great Recession

Wayne Passmore and Shane Sherlund ()

No 2016-031, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Did government mortgage programs mitigate the adverse economic effects of the financial crisis? We find that counties with greater participation in traditional government mortgage programs experienced less severe economic downturns during the Great Recession. In particular, counties with higher levels of participation in FHA, Fannie Mae, and Freddie Mac lending had relatively smaller increases in mortgage delinquency rates; smaller declines in purchase originations, home sales, home prices, and new automobile purchases; and smaller increases in unemployment rates. These results hold both in 2009 (soon after the peak of the financial crisis) and in 2014 (six years after the crisis). The persistence of better economic outcomes in these counties is consistent with a view that mortgage originators' access to a liquidity outlet (in this case, government-backed securitization) is key to maintaining credit flows and economic growth during financial turmoil.

Keywords: Financial crisis; Great Recession; Government policy; Mortgages (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-04-12
New Economics Papers: this item is included in nep-ias, nep-pke and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-31

DOI: 10.17016/FEDS.2016.031r1

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