Abstract
In 2022, a policy increased mortgage guarantee fees for government-sponsored enterprises (GSE) purchases in high-cost areas. Given that the adjustment is specific to selected loan types, we employ a difference-in-differences approach to evaluate the shifts in origination charges for affected mortgages relative to unaffected ones. We find that the increases in origination charges only encapsulate a minor fraction of the escalated costs faced by lenders. Instead, lenders appear to adapt by elevating the interest rates. This research illuminates an unforeseen response from lenders and underscores the necessity for nuanced strategies in housing finance policy formulation.
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