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Vahid Saadi, Role of the Community Reinvestment Act in Mortgage Supply and the U.S. Housing Boom, The Review of Financial Studies, Volume 33, Issue 11, November 2020, Pages 5288–5332, https://doi.org/10.1093/rfs/hhaa023
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Abstract
This paper studies the role of the Community Reinvestment Act (CRA) in the U.S. housing boom-bust cycle. I find that enhanced CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages were awarded to borrowers with lower FICO scores and were more frequently delinquent.