GSE Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals

Posted: 9 Jul 2012 Last revised: 14 Jul 2012

See all articles by Neil Bhutta

Neil Bhutta

Board of Governors of the Federal Reserve System

Date Written: July 9, 2012

Abstract

I estimate the credit supply effect of the Underserved Areas Goal (UAG), which establishes GSE purchase goals for mortgages to lower-income and minority neighborhoods. Taking advantage of discontinuous census tract eligibility rules and abrupt changes in tract eligibility, I find some evidence of a small UAG effect on GSE purchases and mortgage originations, without crowding-out of FHA and subprime lending. The results also suggest that the GSEs exploit the law's lack of precision-targeting, yielding effects that might diverge from the law's intent.

Keywords: GSE, Affordable housing goals, Low and moderate income, Mortgage

Suggested Citation

Bhutta, Neil, GSE Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals (July 9, 2012). Journal of Real Estate Finance and Economics, Vol. 45, No. 1, 2012. Available at SSRN: https://ssrn.com/abstract=2102708

Neil Bhutta (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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