Abstract

There are two main findings regarding GSE lending in minority and racially changing areas. First, the structure of the housing markets in terms of the patterns of housing values, incomes, and the differential distribution of minority populations across existing and newly developing areas affects the patterns of GSE purchases. Second, the particular constellation of lenders in the local markets influences the relative levels of FHA and GSE lending across different markets. In different markets the largest and most influential FHA, GSE, and minority lenders may be essentially the same or quite different. Individual lenders and small groups of lenders can significantly affect lending and GSE purchasing patterns.

Three major market patterns emerged from the study. First, the market share of GSE loans in minority areas is either lower than that in White areas or dependent on a small group of individual lenders for parity. Second, the market shares of Freddie Mac’s purchases show considerably more disparity by race than Fannie Mae’s. Third, a high degree of overlap exists between the income groups served by the FHA and GSE markets. This, along with other supporting evidence, indicates that there may be a correspondingly high degree of potential substitution between the FHA and GSE markets.

The Patterns of GSE Participation in Minority and Racially Changing Markets Reviewed From the Context of the Levels of Distress Associated With High Levels of FHA Lending (*.pdf)

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