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.