TY  - JOUR
AU  - Gerardi,Kristopher
AU  - Rosen,Harvey S.
AU  - Willen,Paul
TI  - Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12967
PY  - 2007
Y2  - March 2007
UR  - http://www.nber.org/papers/w12967
L1  - http://www.nber.org/papers/w12967.pdf
N1  - Author contact info:
Kristopher Gerardi
Federal Reserve Bank of Atlanta
1000 Peachtree St. NE
Atlanta, GA 30309
E-Mail: kristopher.gerardi@atl.frb.org

Harvey S. Rosen
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4022
Fax: 609/258-6419
E-Mail: HSR@princeton.edu

Paul S. Willen
Federal Reserve Bank of Boston
600 Atlantic Avenue
Boston, MA  02210-2204
Tel: 617/973-3149
Fax: 617/973-2123
E-Mail: willen968@gmail.com
AB  - The U.S. mortgage market has experienced phenomenal change over the last 35 years. This paper develops and implements a technique for assessing the impact of changes in the mortgage market on households. Our framework, which is based on the permanent income hypothesis, that allows us to gauge the importance of borrowing constraints by estimating the empirical relationship between the value of a household's home purchase and its future income. We find that over the past several decades, housing markets have become less imperfect in the sense that households are now more able to buy homes whose values are consistent with their long-term income prospects. One issue that has received particular attention is the role that the housing Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, have played in improving the market for housing finance.  We find no evidence that the GSEs' activities have contributed to this phenomenon. This is true whether we look at all homebuyers, or at subsamples of the population whom we might expect to benefit particularly from GSE activity, such as low-income households and first-time homebuyers.
ER  -