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GSEs Help Increase Homeownership for Low- and Moderate Income Families

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According to a new study released by HUD titled "An
Analysis of the Effects of the GSE Affordable Goals on
Low- and Moderate Income Families," Fannie Mae and
Freddie Mac helped reduce the disparity between
homeownership rates for low- and moderate income families
by purchasing more loans originated to low-income
families and increasing their overall market share in the
conventional conforming mortgage market.

The report provides an empirical analysis of the lending
activities of Government Sponsored Enterprises (GSEs)
resulting from the Federal Housing Enterprises Financial
Safety and Soundness Act (FHEFSSA). Congress enacted the
FHEFSSA in 1992 to encourage Fannie Mae and Freddie Mac
to increase their services to low- and moderate income
families and neighborhoods.

The study focuses on two major areas:
o Capital market outcomes, such as mortgage credit
price and quantity changes for targeted borrowers.
o Housing market outcomes, defined by homeownership
rate changes among low- and moderate income and
minority families.
These outcomes were chosen because they are central to
the GSEs' stated objectives of making homeownership
accessible to all who qualify.

The study was based on theoretical and empirical
analyses. Researchers modeled the effects of GSEs'
affordable housing goals on the mortgage market based on
a review of relevant literature. The analyses considered
such factors as decreasing interest rates, rising
incomes, and the effects of the Community Reinvestment
Act, which requires lenders to help meet the credit needs
of the communities they serve.

The findings offer some evidence that GSEs have helped
make it easier for low- and moderate income families to
become homeowners by increasing market share and adding
liquidity in the marketplace. However, the report does
conclude that further research using 2000 Census data
would provide more definitive results.

A complete copy of the report may be obtained from
https://www.huduser.gov

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