GSE impact on rural mortgage markets

This paper examines the spatial integration of the rural mortgage market with the larger national market. It does this by asking three key questions. First, does a jumbo/conforming loan rate differential exist in the rural mortgage market? Second, to what extent are rural and urban mortgage markets integrated? Third, what risk factors contribute to changes in rural and urban mortgage spreads? The results confirm that the rural and urban conforming markets are closely tied, while rural and urban jumbo rural markets are less closely tied. We interpret this as evidence that Government-Sponsored Enterprises (GSE) involvement in the rural market provide rural conforming mortgage borrowers, as compared to rural jumbo borrowers, with improved access to credit.