Does CFPB Oversight Crimp Credit?
72 Pages Posted: 14 Jul 2021 Last revised: 23 Sep 2021
Date Written: February, 2020
We study how regulatory oversight by the Consumer Financial Protection Bureau (CFPB) affects mortgage credit supply and other aspects of bank behavior. We use a difference-in-differences approach exploiting changes in regulatory intensity and a size cutoff below which banks are exempt from CFPB scrutiny. CFPB oversight leads to a reduction in lending in the Federal Housing Administration (FHA) market, which primarily serves riskier borrowers. However, it is also associated with a lower transition probability from moderate to serious delinquency, suggesting that tighter regulatory oversight may reduce foreclosures. Our results underscore the trade-off between protecting borrowers and maintaining access to credit.
Keywords: consumer financial protection, regulation, mortgages, servicing, credit supply
JEL Classification: G21, G28, D18
Suggested Citation: Suggested Citation