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Bank adaptation to neighborhood change: Mortgage lending and the Community Reinvestment Act

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dc.contributor.authorLee, Hyojungen
dc.contributor.authorBostic, Raphael W.en
dc.contributor.departmentApparel, Housing, and Resource Managementen
dc.date.accessioned2021-01-07T15:04:13Zen
dc.date.available2021-01-07T15:04:13Zen
dc.date.issued2020-03en
dc.description.abstractThis research explores whether banks strategically leverage regulatory rules for the Community Reinvestment Act that fix a neighborhood's eligibility status over a decade based on a neighborhood's economic trajectory over that decade. Using 2004-2011 Home Mortgage Disclosure Act (HMDA) data, we find that banks approve loans more frequently in those neighborhoods that are most rapidly improving, and that this effect is stronger if the neighborhoods are CRA-eligible low- and moderate-income (LMI) tracts. We find the "moving up" CRA premium ranges in magnitude from a 2 to 13 percent reduction in the likelihood an application is not approved. These results suggest that banks learn which neighborhoods are most rapidly improving and funnel activity to those places to reduce default risk while complying with the fair lending regulation. The results imply a potential unanticipated consequence of the regulation is that it changes the distribution of resources within the target population.en
dc.format.mimetypeapplication/pdfen
dc.identifier.doihttps://doi.org/10.1016/j.jue.2019.103211en
dc.identifier.eissn1095-9068en
dc.identifier.issn0094-1190en
dc.identifier.otherUNSP 103211en
dc.identifier.urihttp://hdl.handle.net/10919/101767en
dc.identifier.volume116en
dc.language.isoenen
dc.rightsCreative Commons Attribution-NonCommercial-NoDerivs 4.0 Internationalen
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/en
dc.subjectMortgage Lendingen
dc.subjectBank Adaptationen
dc.subjectNeighborhood Changeen
dc.subjectCommunity Reinvestment Acten
dc.titleBank adaptation to neighborhood change: Mortgage lending and the Community Reinvestment Acten
dc.title.serialJournal of Urban Economicsen
dc.typeArticle - Refereeden
dc.type.dcmitypeTexten
dc.type.dcmitypeStillImageen

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