Polarized Politics, Stable Markets: The Case of State Attorneys General & Mortgage Lenders
55 Pages Posted: 17 May 2019 Last revised: 26 Sep 2019
Date Written: 2019
Partisan polarization may subject market participants to inconsistent law-on-the-ground, as successive officials—each with their own party-driven priorities—enter office. To assess this concern, this article studies the effect of party switches in state attorneys general (AGs)—who are charged with enforcing key federal and state mortgage-lending and consumer-protection laws—on mortgage lenders’ activities. Viewing lenders’ observed behavior as a window into their expectations about enforcement levels, we utilize detailed data on residential mortgages to examine whether lender activity changes following a switch in the partisan identification of a state’s AG.
Overall, we find little to no evidence that an AG’s party has a significant impact on mortgage markets. Most models indicate that lenders’ behavior is not materially different in states with a Republican AG versus a Democrat. In the face of an increasingly partisan climate in which state attorneys general operate, mortgage markets display a remarkable degree of stability.
Keywords: mortgage lending, consumer protection, consumer law, empirical legal studies, mortgage finance, attorney general, financial regulation
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