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

See all articles by Ruben Hernandez-Murillo

Ruben Hernandez-Murillo

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Andra C. Ghent

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Multiple version iconThere are 3 versions of this paper

Date Written: March 11, 2012

Abstract

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

Hernandez-Murillo, Ruben and Ghent, Andra C. and Owyang, Michael T., Did Affordable Housing Legislation Contribute to the Subprime Securities Boom? (March 11, 2012). Federal Reserve Bank of St. Louis Working Paper No. 2012-005B. Available at SSRN: https://ssrn.com/abstract=2038577 or http://dx.doi.org/10.2139/ssrn.2038577

Ruben Hernandez-Murillo (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Andra C. Ghent

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Michael T. Owyang

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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