November 01, 2008

Subprime Lending and the Community Reinvestment Act

Kevin Park

There are many causes to the collapse of the housing market and the recent financial turmoil, but the contribution of the CRA appears marginal. While banks did engage in subprime lending in their assessment areas, they did so at a lower rate than the market in general and accounted for only a small fraction of subprime loans to lower-income borrowers and lowerincome neighborhoods. The data suggest that far from being forced into risky corners of the market, the institutions under the scrutiny of the CRA were crowded out by unregulated lenders…

Category: Research Notes

Read More About: Housing Markets & Conditions, Homeownership, Affordability, Neighborhood Change