The Government-Sponsored Enterprises and the Mortgage Crisis: New Perspectives on the Debate

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Abstract/Contents

Abstract: The U.S. mortgage crisis that began in 2007 generated questions about the role played by Fannie Mae and Freddie Mac, the Government-Sponsored Enterprises (GSEs) who dominate the secondary mortgage market, in its causes. Numerous scholars and the press have blamed the Affordable Housing Goals (AHGs), introduced by Congress through the GSE Act of 1992, and the single-family mortgages the GSEs purchased to meet those goals, for driving borrowers at high risk of default into the mortgage market. Using regression discontinuity analysis, this paper measures the effect of one of the goals, the Underserved Areas Goal (UAG), on the number of mortgages purchased by the GSEs in targeted census tracts from 1996 to 2002. Focusing additionally on tracts that became UAG-eligible in 2005-2006, when the Department of Housing and Urban Development (HUD) began to determine eligibility using the 2000 Census, I measure the effect of the UAG on GSE purchases during peak years for the subprime mortgage market. The results suggest a small UAG effect and challenge the perspective that the GSEs‟ single-family mortgage purchases were the primary mechanism by which they increased the number of high-risk borrowers in the mortgage market during the years prior to the crisis.

Type of resource	text
Date created	May 2011

Author	Bolotnyy, Valentin
Primary advisor	Boskin, Michael J.
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics. GSE
Subject	low and moderate income
Subject	special affordable
Subject	financial crisis
Genre	Thesis

Related item	Title 2011 Firestone Medal for Excellence in Undergraduate Research
Location	https://purl.stanford.edu/wq623tx3522

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Preferred Citation: Bolotnyy, Valentin. (2011). The Government-Sponsored Enterprises and the Mortgage Crisis: New Perspectives on the Debate. Stanford Digital Repository. Available at: https://purl.stanford.edu/wq623tx3522

Stanford University, Department of Economics, Honors Theses

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