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Working Paper

Does CFPB Oversight Crimp Credit?


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.

Keywords: consumer financial protection; regulation; mortgages; servicing; credit supply;

JEL Classification: G21; G28; D18;

https://doi.org/10.21799/frbp.wp.2021.08

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Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2020-02-26

Number: 21-08