Homeownership and FHA mortgage activity in neighborhoods and metropolitan areas

Abstract

This paper examines the impact of Federal Housing Administration (FHA) mortgage insurance activity on homeownership at two levels: census tract and metropolitan area. The 1990 Home Mortgage Disclosure Act dataset combined with the 1980 and 1990 U.S. Censuses is used in the analysis. This study extends the previous studies of FHA activity by having broader coverage, a better measure of relative FHA activity and better control of other factors that affect homeownership and mortgage activity. The empirical results indicate that the FHA mortgage insurance program has significant positive effects on homeownership in predominantly white and/or moderate to high-income MSAs and predominantly minority and/or moderate- to high-income census tracts. However, the estimated coefficients associated with the relative FHA activity are found to be relatively small in magnitude. Overall, results suggest that FHA programs are of limited effect in the achievement of homeownership, but may be of greater assistance to whites relative to blacks.