Regression discontinuity estimates of the effects of the GSE act of 1992

Neil Bhutta

No 2009-03, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In this paper I estimate the effect of the Underserved Areas Goal (UAG) established under the ?GSE Act?, a 1992 law mandating that the housing government-sponsored enterprises Fannie Mae and Freddie Mac help promote credit access and homeownership opportunities for low-income households and in low-income and minority neighborhoods. I identify the goal?s impact by taking advantage of a discontinuity in the census tract eligibility rule. Employing local linear and non-parametric regression discontinuity methods, I find that this goal has had a direct effect on GSE purchasing activity of 3-4% and increases overall GSE-eligible originations by 2-3% on average at the cutoff between 1997 and 2002. Changing eligibility status following the release of Census 2000 data provides another source of variation to identify the UAG?s effect in 2005 and 2006, years of sharply increasing goals levels and years which have contributed heavily to current credit losses. I find that while the UAG affected GSE behavior in 2005 and 2006, GSE risk avoidance limited their response. Unlike previous research, I find no evidence that UAG-induced increases in GSE credit supply crowds-out FHA and subprime lending.

Keywords: Mortgage loans; Mortgages (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/pubs/feds/2009/200903/revision/200903pap.pdf Full text (application/pdf)
https://www.federalreserve.gov/pubs/feds/2009/200903/200903pap.pdf Full text (Original) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2009-03

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().