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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
The Marginal Effect of Government Mortgage Guarantees on Homeownership
Serafin J. Grundl
You Suk Kim
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.


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Serafin J. Grundl & You Suk Kim, The Marginal Effect of Government Mortgage Guarantees on Homeownership, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2019-027, 16 Apr 2019.
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Keywords: Federal Housing Administration ; Government mortgage guarantees ; Government-sponsored enterprises ; Homeownership
DOI: 10.17016/FEDS.2019.027
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