Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?

35 Pages Posted: 26 Oct 2015

See all articles by Andra C. Ghent

Andra C. Ghent

University of North Carolina (UNC) at Chapel Hill - Finance Area

Ruben Hernandez-Murillo

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Multiple version iconThere are 3 versions of this paper

Date Written: Winter 2015

Abstract

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 nonprime mortgages with individual‐ and neighborhood‐level data for California and Florida. We find no evidence that lenders increased subprime originations or altered loan pricing around the discrete eligibility cutoffs for the Government‐Sponsored Enterprises' (GSEs) affordable housing goals or the Community Reinvestment Act. Although we find evidence that the GSEs bought significant quantities of subprime securities, our results indicate that these purchases were not directly related to affordable housing mandates.

Suggested Citation

Ghent, Andra C. and Hernandez-Murillo, Ruben and Owyang, Michael T., Did Affordable Housing Legislation Contribute to the Subprime Securities Boom? (Winter 2015). Real Estate Economics, Vol. 43, Issue 4, pp. 820-854, 2015. Available at SSRN: https://ssrn.com/abstract=2679173 or http://dx.doi.org/10.1111/1540-6229.12110

Andra C. Ghent (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Ruben Hernandez-Murillo

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

East 6th & Superior
Cleveland, OH 44101-1387
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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