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Did The Community Reinvestment Act (Cra) Lead To Risky Lending?, Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru
Did The Community Reinvestment Act (Cra) Lead To Risky Lending?, Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru
Kreisman Working Paper Series in Housing Law and Policy
Yes, it did. We use exogenous variation in banks' incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tractmonth that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by …
Policy Intervention In Debt Renegotiation: Evidence From The Home Affordable Modification Program, Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet
Policy Intervention In Debt Renegotiation: Evidence From The Home Affordable Modification Program, Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet
Kreisman Working Paper Series in Housing Law and Policy
The main rationale for policy intervention in debt renegotiation is to enhance such activity when foreclosures are perceived to be inefficiently high. We examine the ability of the government to influence debt renegotiation by empirically evaluating the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries (servicers) with sizeable financial incentives to renegotiate mortgages. A difference-in-difference strategy that exploits variation in program eligibility criteria reveals that the program generated an overall increase in the intensity of renegotiations while adversely affecting the effectiveness of renegotiations performed outside the program. Renegotiations induced by the program resulted in a modest …