Discussion paper

DP15681 Does CFPB Oversight Crimp Credit?

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.

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Citation

Plosser, M and J Vickery (2021), ‘DP15681 Does CFPB Oversight Crimp Credit?‘, CEPR Discussion Paper No. 15681. CEPR Press, Paris & London. https://cepr.org/publications/dp15681