Financial Technology and the 1990s Housing Boom

Stephanie Johnson and Nitzan Tzur-Ilan

No 2506, Working Papers from Federal Reserve Bank of Dallas

Abstract: The 1990s rollout of mortgage automated underwriting systems allowed for complex underwriting rules, cut processing time and raised house prices substantially. We show that locations exposed to initial adopters of Freddie Mac’s Loan Prospector system experienced an early housing boom due to a switch to statistically-informed underwriting rules. Loan Prospector adoption increased lending at high loan-to-income ratios by around 18 percent. Applying our estimated response to lenders who adopted later, we find that the rollout of new lending standards with the GSEs’ systems can explain more than half of U.S. house price growth between 1993 and 2002.

Keywords: credit; house prices; financial technology; mortgages (search for similar items in EconPapers)
JEL-codes: G21 L85 R21 R31 (search for similar items in EconPapers)
Pages: 66
Date: 2025-01-17
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:99619

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DOI: 10.24149/wp2506

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