REP Research Seminar - Presenting in person - Wenchuan Zhao - University of Oxford Title: "Rationed, Not Repriced: Mortgage Access and House Prices".

Abstract: Government support for mortgage credit often ends up in house prices rather than in more homeowners. We show that creditworthy borrowers were rationed at posted terms, so a policy can work by improving the lender's margin without making loans cheaper. Combining spatial difference-in-differences and structural estimation, we study the Duty to Serve mandate, which requires the government-sponsored enterprises (GSEs) to buy more mortgages in eligible rural areas. Lenders keep the concession as margin rather than cutting rates, and as a result loan approvals rise, mostly for low- and moderate-income households. The concession costs only a few basis points per loan, while the approval is worth several thousand dollars a year to the borrower who receives it. In equilibrium, marginal homebuyers keep the surplus and incumbent owners gain little because of elastic housing supply.

Short Bio: Wenchuan Zhao is a PhD candidate in Finance at the University of Oxford’s Saïd Business School. He studies the real effects of finance, with a focus on how financial shocks reshape local labor and housing markets. His research combines reduced-form empirical methods with spatial equilibrium models.