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Abstract: 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.

Keywords: GSE, regression discontinuity, FHA, affordable housing goals, homeownership, subprime mortgage, underserved areas

Full paper: Revised (855 KB PDF) | Original (1 MB PDF)
Full paper (Screen Reader Version): Revised | Original

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