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, November 2002

Richard Williams & Carolyn Bond
Department of Sociology, University of Notre Dame

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Because of the significant benefits they receive, the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) are expected to "lead the mortgage finance industry in making credit available for low- and moderate-income families."  This study examines GSE leadership in two ways.  First, are the GSEs doing relatively more of their business with underserved markets than are financial institutions that do not enjoy the GSEs - special privileges and benefits?  Second, does the GSEs - leadership help narrow the gap in home mortgage lending that exists between served and underserved markets?  Using HMDA and GSE data sets, we conduct descriptive and multivariate analyses of nationwide lending between 1993 and 2000.  We conclude that the GSEs are not leading -- but they are not as far behind as they have been.  They do not purchase relatively more underserved market loans than the primary market makes.  Many of the gains they have made may have come from the purchase of loans that have limited impact on underserved markets.  But, there have been signs of progress.  In 1999 and 2000, GSE purchases of underserved market loans significantly increased.  A very low income went from being the greatest barrier to GSE purchase in 1993-1998 to being almost no barrier at all in 1999-2000.  The lenders who do the most business with the GSEs made relatively more loans to underserved markets in 1999-2000 than they had been earlier.  Nonetheless, by the year 2000 there continued to be significant racial, economic, and geographic disparities in the distribution of GSE benefits.


Executive Summary (6 pages, 137K).  View this to see all the topics covered in the report.

Complete Final Report, November 2002 (64 pages, 1288K)


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)