Abstract
AbstractDid government mortgage programs mitigate the adverse economic effects of the 2007–2009 Great Recession? We find that counties with greater participation in precrisis government mortgage programs experienced less‐severe economic downturns during the Great Recession. In particular, counties with higher proportions of Federal Housing Administration (FHA), Fannie Mae and Freddie Mac lending prior to the financial crisis had smaller increases in serious delinquency and foreclosure rates; smaller declines in mortgage purchase originations, house prices, and new automobile purchases; and smaller increases in unemployment rates. Some of these effects were still evident in 2014 despite numerous new government policies and programs designed to promote economic recovery. We conclude that preexisting mortgage programs with more stable underwriting standards, credit risk pricing and liquidity played a key role in supporting economic conditions during the Great Recession.
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