Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?
Federal Reserve Bank of St. Louis Working Paper No. 2012-005B
53 Pages Posted: 12 Apr 2012 Last revised: 20 Dec 2013
Date Written: March 11, 2012
No. In this paper we use a regression discontinuity approach to investigate whether affordable housing policies influenced origination or affected prices of subprime mortgages. We use merged loan-level data on non-prime securitized 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 due to their affordable housing mandates.
Keywords: Mortgages, Loan Performance, Community Reinvestment Act, GSEs
JEL Classification: G21, G28, R31, R38
Suggested Citation: Suggested Citation