Mortgage supply and the US housing boom: The role of the Community Reinvestment Act

Vahid Saadi

No 155, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper studies the role of the Community Reinvestment Act (CRA) in the US housing boom-bust cycle. I find that the enhancement in CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages went to borrowers with lower FICO scores and encountered more frequent delinquencies.

Keywords: The Community Reinvestment Act; Mortgage supply; House prices; Homeownership (search for similar items in EconPapers)
JEL-codes: G21 G28 R21 R31 (search for similar items in EconPapers)
Date: 2019, Revised 2019
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:155

DOI: 10.2139/ssrn.2877609

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