Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?

Federal Reserve Bank of St. Louis

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Date Published 2012
Primary Author Ruben Hernandez-Murillo
Other Authors Andra C. Ghent and Michael T. Owyang
Theme Housing Finance Policy


No. In this paper we use a regression discontinuity approach to investigate whether aff ordable housing policies influenced origination or aff ected prices of subprime mortgages. We use merged loan-level data on non-prime securitized mortgages with individual and neighborhood-level data for California and Florida. We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoff s for the Government Sponsored Enterprises' (GSEs) affordable housing goals or the Community Reinvestment Act. Although the GSEs may have played a role in the crisis, our results indicate that it was not due to their affordable housing mandates.

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