Working Paper

The Marginal Effect of Government Mortgage Guarantees on Homeownership

Abstract: 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.

Keywords: Federal Housing Administration; Government mortgage guarantees; Government-sponsored enterprises; Homeownership;

JEL Classification: G21; R31; R38;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2019-04-16

Number: 2019-027

Pages: 44 pages