Working Paper: CEPR ID: DP15681
Authors: Andreas Fuster; Matthew Plosser; James Vickery
Abstract: We study how regulatory oversight by the Consumer Financial Protection Bureau (CFPB) affects mortgage credit supply and other aspects of bank behavior. We use a difference-in-differences approach exploiting changes in regulatory intensity and a size cutoff below which banks are exempt from CFPB scrutiny. CFPB oversight leads to a reduction in lending in the Federal Housing Administration (FHA) market, which primarily serves riskier borrowers. However, it is also associated with a lower transition probability from moderate to serious delinquency, suggesting that tighter regulatory oversight may reduce foreclosures. Our results underscore the trade-off between protecting borrowers and maintaining access to credit.
Keywords: consumer financial protection; regulation; mortgages; servicing; credit supply
JEL Codes: G21; G28; D18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CFPB oversight (G28) | reduction in FHA lending (G21) |
| CFPB oversight (G28) | shift towards jumbo loans (G21) |
| CFPB oversight (G28) | improvement in mortgage servicing practices (G21) |
| CFPB oversight (G28) | lower transition probabilities from moderate to serious delinquency (P37) |
| regulatory arbitrage (G18) | shift FHA lending from nonbank subsidiaries to bank subsidiaries (G21) |