SAFE Working Paper No. 155

Mortgage Supply and the US Housing Boom: The Role of the Community Reinvestment Act

This paper studies the role of the Community Reinvestment Act (CRA) in the US housing boom-bust cycle. I nd that the enhancement in 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 nd that CRA-induced mortgages went to borrowers with lower FICO scores and encountered more frequent delinquencies.