Regulations, Community Bank and Credit Union Exits, and Access to Mortgage Credit
51 Pages Posted: 4 Jul 2014 Last revised: 23 Oct 2018
Date Written: October 14, 2018
We analyze the effect of a U.S. subprime mortgage regulation on the availability of mortgage credit. Due to all subprime mortgage originators being affected by the regulation studied, there is no natural control group. We use a prot maximization assumption to construct a control group. We nd no statistically signicant impact of the regulation, despite about 200 institutions exiting the subprime mortgage market in over 200 counties, although we cannot rule out economically signicant impacts on some types of loans for certain types of borrowers. These results, along with other evidence presented in the article, suggest that consumers were able to switch to similar loans originated by the exiting creditors' competitors. We then perform several robustness checks, including comparing our approach with a more traditional method of using an unaffected but related market (subprime manufactured housing) as a control group and analyzing the effects of a later regulation exempting many creditors from the aforementioned regulation, with this later regulation presenting a natural threshold for a regression discontinuity approach.
Keywords: program evaluation, regulation, mortgage, access to credit, consumer protection
JEL Classification: L51, C21, G21
Suggested Citation: Suggested Citation