Financial Technology and the 1990s Housing Boom.

The 1990s rollout of mortgage automated underwriting systems allowed for complex underwriting rules, cut processing time, and raised house prices substantially. We show that locations exposed to initial adopters of Freddie Mac's Loan Prospector system experienced an early housing boom due to a switch to statistically-informed underwriting rules. Loan Prospector adoption increased lending at high loan-to-income ratios by around 18 per cent. Applying our estimated response to lenders who adopted later, we find that the rollout of new lending standards with the GSEs' systems can explain more than half of U.S. house price growth between 1993 and 2002. [ABSTRACT FROM AUTHOR]