Regressive Mortgage Credit Redistribution in the Post-crisis Era

Abstract

We document that, since 2011, mortgage lenders reduced credit to middle-class households by 15% and increased credit to wealthy households by 21%. Credit to low-income households was unaffected. Results hold at the individual-loan level and zip-code level, and at the intensive margin and extensive margin. The redistribution increased monotonically with the size of the lender. The collapse of the private-label securitization market, banks’ risk-management concerns, wealth polarization, post- crisis policies of GSEs, or pre-crisis indebtment are unlikely to explain the results. The results appear consistent with large banks reacting more to the increased costs of origination imposed by financial regulation.

Keywords: Mortgage Market, Financial Crisis, Dodd-Frank, Income Inequality

JEL Classification: D78, D92, G18, G21, G23, H32, K22