IDEP Conferences, 11th journées Louis-André Gérard-Varet

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Did affordable housing legislation contribute to the subprime securities boom ?
Ruben Hernandez, Andra C. Ghent, Michael T. Owyang

Last modified: 2012-04-20


No. In this paper we use a regression discontinuity approach to investigate whether affordable housing policies influenced origination or affected prices of subprime mortgages. We use merged loan-level data on non-prime securitized mortgages with individual- and neighborhood-level data for California and
Florida. We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises' (GSEs) affordable housing goals or the Community Reinvestment Act. Our results indicate that the extensive purchases of risky private-label mortgage-backed securities by the GSEs were not due to
affordable housing mandates.

JEL: G21, G28, R31, R38

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