Financial Technology and the 1990s Housing Boom

58 Pages Posted: 29 Jun 2020 Last revised: 8 Mar 2024

See all articles by Stephanie Johnson

Stephanie Johnson

Rice University, Jones School of Business

Nitzan Tzur-Ilan

Federal Reserve Bank of Dallas

Date Written: March 7, 2024

Abstract

The 1990s rollout of mortgage automated underwriting systems allowed for
complex underwriting rules, cut processing time, and increased house prices. 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 statisticallyinformed
underwriting rules. Loan Prospector adoption increased the share of
lending at high loan-to-income ratios by around 30 per cent. Applying our estimated
response to lenders who adopted later, we suggest that the rollout of new
lending standards with the GSEs’ systems can explain a large share of U.S. house
price growth between 1993 and 2002.

Keywords: credit, house prices, financial technology, mortgages

JEL Classification: G21, L85, R21, R31

Suggested Citation

Johnson, Stephanie and Tzur-Ilan, Nitzan, Financial Technology and the 1990s Housing Boom (March 7, 2024). Available at SSRN: https://ssrn.com/abstract=3619105 or http://dx.doi.org/10.2139/ssrn.3619105

Stephanie Johnson (Contact Author)

Rice University, Jones School of Business ( email )

Nitzan Tzur-Ilan

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

HOME PAGE: http://nitzantzur-ilan.com

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