Federal mandates and mortgage supply : regression discontinuity analyses of the community reinvestment and GSE Acts.

In this dissertation, I provide evidence of the causal impact on mortgage supply of the Community Reinvestment Act (CRA) and the "Government-Sponsored Enterprises (GSE) Act", laws requiring banks and the GSEs (Fannie Mae and Freddie Mac), respectively, to help improve credit access for low-income households and neighborhoods. While financial markets evolved rapidly since the early 1990's, I use discontinuities in the laws' eligibility rules to identify their effects. To implement the analyses, I use a census of mortgage applications collected under the Home Mortgage Disclosure Act. Overall, these programs appear to have had limited impact. I first analyze CRA's effect on mortgage lending in targeted neighborhoods: census tracts with a median family income (MFI) under 80% of MSA MFI. The regression discontinuity (RD) estimates suggest an overall credit supply shift of at least $6 billion ($2007) from 1994 and 2002 in targeted neighborhoods. In addition to CRA's direct effect on bank lending, I also find that unregulated institutions lend more in targeted tracts ("crowd-in"). Further analysis suggests that information spillovers from increased bank lending helps generate crowd-in. In Chapter 2, I examine CRA's effect on home purchase mortgage lending to households with income under 80% of the MSA MFI. In both Chapters 1 and 2, I find CRA's impact is concentrated in the largest MSAs, where enforcement is most intense. The RD estimates indicate that CRA caused a 6% increase in large MSA bank home purchase lending at the cutoff.