State-backed mortgages promote little homeownership – Fed paper
Guarantees can lead to inflated house prices, researchers warn
Government guarantees of mortgages do little to increase homeownership, a team of researchers from the Federal Reserve finds.
The results are particularly relevant as the Federal Housing Finance Agency increased conforming loan limits (CLL) – the maximum loan size that can be guaranteed by the government – in 2017, 2018 and 2019. According to the report authors, homeownership is cited as one of the tool’s goals.
Serafin Grundl and You Suk Kim use property-level data on CLLs to estimate the
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