GSE Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals
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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.
KeywordsGSE Affordable housing goals Low and moderate income Mortgage
The views expressed in this paper are solely those of the author. This research draws partially from my economics dissertation at MIT. I thank Paul Calem, Glenn Canner, Michael Greenstone, Hui Shan and Christopher L. Smith for very helpful comments and suggestions. All mistakes are mine. Thanks to the MIT Dewey Library staff, the MIT Shultz fund, the MIT Department of Economics and National Science Foundation for support.
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