Financial Technology and the 1990s Housing Boom

54 Pages Posted: 29 Jun 2020 Last revised: 13 Mar 2023

See all articles by Stephanie Johnson

Stephanie Johnson

Rice University, Jones School of Business

Date Written: March 12, 2023


This paper measures the effects of automated mortgage underwriting systems on leverage and house prices during the 1990s. In addition to reducing processing times, these systems expanded credit access by incorporating new rules informed by statistical analysis. In particular, Freddie Mac’s underwriting system, Loan Prospector, applied a proprietary set of rules which allowed lenders to approve loans with high debt-to-income ratios. I obtain a list of lenders who were using Loan Prospector shortly after its release in 1995, and use variation in the market share of these lenders to study the effect on house prices. I show that early adopters of Loan Prospector expanded high leverage lending, and that counties exposed to these lenders experienced substantial relative growth in house prices starting in 1995. Based on my estimates, I argue that gradual adoption of the GSEs’ underwriting systems can explain a substantial share of U.S. house price growth during the late 1990s.

Keywords: mortgages, house prices, financial technology

JEL Classification: G21, R21, R31

Suggested Citation

Johnson, Stephanie, Financial Technology and the 1990s Housing Boom (March 12, 2023). Available at SSRN: or

Stephanie Johnson (Contact Author)

Rice University, Jones School of Business ( email )

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