Non-Banks and Lending Standards in Mortgage Markets. The Spillovers from Liquidity Regulation

“Don't Know What You Got till It’s Gone”: The Community Reinvestment Act in a Changing Financial Landscape

“…The three-way DID regression models also confirm that relative to the change for nondepository institutions, the share of FHA lending by CRA-regulated lenders has decreased more sharply in newly ineligible tracts (by −7.4 percentage points). This is not surprising because nondepository institutions, relative to CRA-regulated depository institutions, are more likely to specialize in FHA lending in recent years (Getey and Reher, 2017). Results suggest that nondepository institutions are more likely to originate more mortgages, a disproportionately large share of which are FHA loans, in response to the decreased lending by CRA-regulated lenders when a neighborhood loses its CRA eligibility status.…”

Capital Regulation, Market-Making, and Liquidity

“…With regards to mortgage lending, Buchak et al (2018) develop a quantitative model of mortgage lending suggesting that regulation accounts for roughly 60% of shadow bank growth. Similarly, Gete and Reher (2017) document how liquidity regulation has attracted non-banks and originate-to-sell lenders towards the FHA market.…”