Housing-Finance Intervention and Private Incentives: Helping Minorities and the Poor

DESPITE THE PLETHORA of government programs and heated policy debates over the last several decades, little has been settled about the proper role for government in housing markets in general, and the mortgage market in particular. Government, it is argued, can play an important role in encouraging homeownership and eliminating discrimination in credit markets. Yet, hard evidence on the existence of discrimination is weak, as is the existing theoretical literature explaining discrimination in the credit market. Without an understanding of the magnitude and origin of discriminatory behavior in the marketplace, any policy response is merely a shot in the dark. Moreover, while being a minority is not synonymous with being poor, many programs designed to deal explicitly with poverty and its effect on housing market access are often shrouded with racial overtones in policy debates, further complicating discussion of their relative merits. This paper provides a survey and analysis of government interventions in the housing credit market. I We propose several possible goals behind government inter-