| Title: |
Does
the Community Reinvestment Act (CRA) Cause Banks to Provide a Subsidy
to Some Mortgage Borrowers? |
| Author(s): |
Glenn B. Canner, Elizabeth Laderman,
Andreas Lehnert and Wayne Passmore |
| Publication: |
Finance and Economics
Discussion Series
April 2002 |
| Organization: |
Board of Governors
of the Federal Reserve System |
| Methodology: |
Analysis of home purchase mortgage
data made over the period of 1995-2000. The study is based on the
fact that CRA credit is given for loans to higher-income borrowers
who purchase homes in lower-income neighborhoods, but not to other
higher-income borrowers. The researchers tested whether CRA-affected
lenders cut interest rates to CRA-eligible borrowers to test for the
presence of a regulation driven subsidy. |
| Primary conclusions: |
Empirically, CRA-eligible
loans made through CRA-affected institutions do carry lower mortgage
spreads compared with other loans. |
| However, controlling for risk and
benefit effects suggested by their theory, the differences in mortgage
spreads become economically and statistically insignificant. |
| URL: |
http://www.federalreserve.gov/pubs/feds/2002/200219/200219pap.pdf |
| Bibliography: |
Yes |
| Number of pages: |
84 |
