BibTeX
@MISC{Canner_assistantdirector,
author = {Glenn B. Canner and Elizabeth Laderman and Andreas Lehnert and Wayne Passmore},
title = {Assistant Director},
year = {}
}
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Abstract
and Guillermo Pinczuk for excellent research assistance. Any remaining errors are our own. Does the Community Reinvestment Act (CRA) Cause Banks to Provide a Subsidy to Some Mortgage Borrowers? The Community Reinvestment Act (CRA) encourages lenders to make mortgage loans to certain classes of borrowers. However, the law does not apply to all lenders, and lenders do not necessarily receive credit for all loans made to bor-rowers of a particular class. Specifically, only commercial banks and savings in-stitutions are subject to the CRA, while mortgage bankers are not. Further, CRA credit is given for loans made to higher-income borrowers who purchase homes in lower-income neighborhoods, but not to other higher-income borrowers. We use this variation to test whether or not CRA-affected lenders cut interest rates to CRA-eligible borrowers; in other words, we test for the presence of a regulation-driven subsidy. Our theory suggests that loans made by commercial banks and savings associations (“relationship lenders”) and mortgage companies (“transac-
Keyphrases
assistant director commercial bank higher-income borrower community reinvestment act mortgage borrower guillermo pinczuk remaining error regulation-driven subsidy certain class mortgage loan particular class mortgage company interest rate relationship lender lower-income neighborhood mortgage banker cause bank saving in-stitutions cra credit saving association cra-affected lender cra-eligible borrower excellent research assistance
