Finance and Economics Discussion Series: Gse Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals

ISBN: 1288705247

Author: Bhutta, Neil

Condition: New

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 in 2005, I find evidence of a small UAG effect on GSE activity, and this increase does not appear to crowd-out FHA and subprime lending. The results also indicate that the GSEs exploit the law's lack of precision targeting, yielding effects that might diverge from the law's intent.