Polarized State Politics, Stable Mortgage Markets
45 Pages Posted: 17 May 2019 Last revised: 5 Dec 2019
Date Written: 2019
Mortgage markets and their regulation have been a focus of increasingly polarized political debates, reﬂected in an academic literature showing the impact of partisan politics on ﬁnancial markets. Since the ﬁnancial crisis, states have played an increasing role in regulating mortgage markets, due to the growth of nationwide litigation by state attorneys general and the expansion of “shadow” non-bank lenders who are primarily regulated by the states. We study whether real mortgage lending and performance outcomes are affected by state party politics, independent of national conditions. We document that signiﬁcant average differences between states with Democratic and Republican governors and AGs in lending quantity, quality, and performance can be largely explained by macroeconomic trends. The results suggest that state party politics do not have a signiﬁcant material impact on mortgage markets. Thus, the results cast doubt on the notion that regulatory regimes that rely on state enforcement will face divisive political obstacles.
Keywords: mortgage lending, consumer protection, consumer law, empirical legal studies, mortgage finance, attorney general, financial regulation
JEL Classification: D14, D18, D72, G21, K22, P16
Suggested Citation: Suggested Citation