DP15681 Does CFPB Oversight Crimp Credit?

Author(s):	Andreas Fuster, Matthew Plosser, James Vickery
Publication Date:	January 2021
Keyword(s):	Consumer financial protection, credit supply, Mortgages, Regulation, Servicing
JEL(s):	D18, G21, G28
Programme Areas:	Financial Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=15681

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.