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FHA, Fannie Mae, Freddie Mac and the Great Recession
Author(s) -
Passmore Wayne,
Sherlund Shane M.
Publication year - 2019
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12296
Subject(s) - foreclosure , underwriting , unemployment , mortgage insurance , recession , mortgage underwriting , market liquidity , economics , government (linguistics) , loan , great recession , finance , inflation (cosmology) , financial system , monetary economics , business , labour economics , macroeconomics , insurance policy , linguistics , philosophy , casualty insurance , physics , theoretical physics
Did 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.