The Effect of GSEs, CRA, and Institutional Characteristics on Home Mortgage Lending to Underserved Markets

Study funded by HUD, 1997-1999

Richard Williams, Principal Investigator
Department of Sociology, University of Notre Dame

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This study longitudinally compares the characteristics of loans made or bought by different institutions to see which types of lenders "lead the mortgage finance industry in making credit available for low- and moderate-income families" and which are merely following behind.  Hypotheses are tested via a case study analysis of conventional home mortgage lending in Indiana for the years 1992-1996.  Results show that, while the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) made gains in underserved markets during this period, at no time were they ever "leading the market."  There is also no clear evidence that the Community Reinvestment Act (CRA) was a major contributor to gains made by underserved markets, perhaps because Indiana citizen groups failed to take advantage of its provisions. Counter to the fears of some, increasing market share for larger lenders did not appear to be detrimental to underserved markets.  The results also raise the disturbing possibility that subprime lenders may have stolen away borrowers who could have gotten better deals elsewhere.  Given the rapid pace of change in home mortgage lending and the recent adoption of new programs by the GSEs, the key findings of this study may soon need to be updated.


Executive Summary (5 pages, 18K).  View this to see all the topics covered in the report.

Complete Final Report, December 1999 (102 pages, 379K)

Cityscape 2001 (98 pages, 399K).  This is the slightly revised published version of the report.

GSEs, the CRA and Home Mortgage Lending to Underserved Markets in Indiana, 1992-1999 (Notre Dame Sociology Working Paper 2000-03, Revised April 2001) is an updated and greatly reworked version of the original GSE and CRA parts of the analysis.  The analysis now extends through 1999 rather than 1996. The paper also includes new or expanded discussions of the social science  research on inequality in home mortgage lending and the sociological importance of homeownership to underserved markets. Much more detail is provided on what "leading the market" does and should mean.  Several issues that the GSEs have raised about how they should be evaluated are addressed.


Here is a story done by the Notre Dame Observer.

Inside Mortgage Finance (located on the web at has graciously given permission to reprint two articles they have done on this research.  The first discusses this study and another funded by HUD.  The second describes Fannie Mae's criticism of the research and my response.  The Appendix of the report (pages A-5 to A-9) elaborates on the points I raised in response to Fannie Mae.


Residential Segregation and the Transformation of Home Mortgage Lending (Social Forces, December 2007)

Alternative Assessments of GSE Performance, Influence and Impact (Final Report for HUD, May 2006)

The Changing Face of Inequality in Home Mortgage Lending (Social Problems, May 2005)

Are the GSEs Leading, and If So Do They Have Any Followers? An Analysis of the GSEs - Impact on Home Purchase Lending to Underserved Markets During the 1990s (Final Report for HUD, December 2002)

The Effect of GSEs, CRA, and Institutional Characteristics on Home Mortgage Lending to Underserved Markets  (Final Report for HUD, December 1999; slightly revised version published in Cityscape, 2001)

Racial, Economic and Institutional Differences in Home Mortgage Loans: St. Joseph County, Indiana (Journal of Urban Affairs, 1997)