The Marginal Effect of Government Mortgage Guarantees on Homeownership

The Marginal Effect of Government Mortgage Guarantees on Homeownership

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.

Serafin Grundl and You Suk Kim

Federal Reserve

February 27, 2019

I didn't find this helpful.This was helpful. Please let us know if you found this article helpful.
Loading...
By |2019-04-23T13:31:59-07:00January 1st, 2018|Financial Regulation, Mortgage Finance, Reference|