Policies and Regulation in Mortgage Markets
Friday, Jan. 3, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Tess Scharlemann, Federal Reserve Board
Mortgage Brokers and the Effectiveness of Regulatory Oversights
AbstractThis paper studies the heterogeneous responses among different types of mortgage brokers to the consolidated occupational licensing regulations. We explicitly account for the heterogeneities between sole brokers and corporate brokers. Our findings suggest that sole brokers respond to the reinforced regulatory oversights by applying a more stringent screening process in loan originations based on soft information, hence achieve better subsequent loan performances. In contrast, we find no regulatory effect on corporate brokers. The agency problem among sole brokers can be mitigated by consolidated financial requirement for occupational licensing. However, such provision turns out to be ineffective in governing corporate brokers.
Effects of the Community Reinvestment Act (CRA) on Small Business Lending
AbstractThis study provides new evidence on the effectiveness of the Community Reinvestment Act (CRA) on small business lending by focusing on a sample of neighborhoods with changed CRA eligibility status across the country because of an exogenous policy shock in 2013. The results of difference-in-differences analysis provide consistent evidence that the CRA promotes small business lending, especially in terms of number of loan originations, in lower-income neighborhoods. The generally positive effects of the CRA are sensitive to the types of CRA treatment. Losing CRA eligibility status has a relatively larger effect on small business lending activities, while the effects of newly gaining CRA eligibility are less pronounced. The results are fairly robust when alternative sample periods and control groups are used.
The Political Economy of Mortgage Lending
AbstractWe examine whether banks use mortgage lending as a tool for political influence seeking. We find that the approval rates of mortgage applications from the home states of the Senate Banking Committee chairs are higher than other states, which amounts to about $37-$38 million dollars of extra mortgage credit extended to the home state of the Senate Banking Committee Chair. We use the geographic regression discontinuity design by comparing the census tracts close to the state borders to ensure that the results are not driven by demand-side factors. We also find that the effect is more pronounced when the incumbent banking chair is up for re-election. We do not find a similar effect for other powerful committee chairs. We also do not find the effect for non-bank lenders.
- G2 - Financial Institutions and Services
- R2 - Household Analysis