The Marginal Effect of Government Mortgage Guarantees on Homeownership

45 Pages Posted: 17 Apr 2019

See all articles by Serafin Grundl

Serafin Grundl

Board of Governors of the Federal Reserve System

You Suk Kim

Board of Governors of the Federal Reserve System

Date Written: 2019-04-16

Abstract

The U.S. government guarantees a majority of residential mortgages, which is often justified as a means to promote homeownership. In this paper we use property-level data to estimate the effect of government mortgage guarantees on homeownership, by exploiting variation of the conforming loan limits (CLLs) along county borders. We find substantial effects on government guarantees, but find no robust effect on homeownership. This finding suggests that government guarantees could be considerably reduced with modest effects on homeownership, which is relevant for housing finance reform plans that propose to reduce the government's involvement in the mortgage market by reducing the CLLs.

Keywords: Federal Housing Administration, Government mortgage guarantees, Government-sponsored enterprises, Homeownership

JEL Classification: G21, R31, R38

Suggested Citation

Grundl, Serafin and Kim, You Suk, The Marginal Effect of Government Mortgage Guarantees on Homeownership (2019-04-16). FEDS Working Paper No. 2019-027. Available at SSRN: https://ssrn.com/abstract=3373714 or http://dx.doi.org/10.17016/FEDS.2019.027

Serafin Grundl (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

You Suk Kim

Board of Governors of the Federal Reserve System ( email )

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

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