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Does CFPB Oversight Crimp Credit?

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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.

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  • Andreas Fuster & Matthew Plosser & James Vickery, 2018. "Does CFPB Oversight Crimp Credit?," Staff Reports 857, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:857
    Note: Revised January 2021.
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    Cited by:

    1. Sedunov, John, 2020. "Small banks and consumer satisfaction," Journal of Corporate Finance, Elsevier, vol. 60(C).
    2. Richard K. Crump & João A. C. Santos, 2018. "Review of New York Fed studies on the effects of post-crisis banking reforms," Economic Policy Review, Federal Reserve Bank of New York, issue 24-2, pages 71-90.

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    More about this item

    Keywords

    consumer financial protection; regulation; mortgages; servicing; credit supply;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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