Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?

Abstract:     
No, not directly. We use a regression discontinuity approach and present new institutional evidence to investigate whether affordable housing policies influenced the market for securitized subprime mortgages. We use merged loan-level data on non-prime mortgages with individual- and neighborhood-level data for California and Florida. We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises' (GSEs) affordable housing goals or the Community Reinvestment Act. Although the GSEs may have played a role in the crisis, our results indicate that it was not directly related to their affordable housing mandates.

Number of Pages in PDF File: 70

Keywords: mortgages, financial crisis, community reinvestment act, GSEs

JEL Classification: G21, G28, R31, R38

working papers series