Community lending and commercial bank mergers
Changes in the distribution of banking offices
The past twenty years have been marked by major structural and regulatory changes in the banking industry. This article explores the relationships between these changes and the distribution of "brick and mortar" banking offices between 1975 and 1995. The analysis explores how population shifts, deregulation, and mergers, acquisitions, and failures may have influenced changes in the number and location of banking offices. Special attention is given to changes in banking office distributions across neighborhoods grouped by the median income of their residents and their central city, suburban, ...
Credit risk, credit scoring, and the performance of home mortgages
This article examines the ways institutions involved in mortgage lending assess credit risk and how credit risk relates to loan performance. An increasingly prominent tool used to facilitate the assessment of credit risk in mortgage lending is credit scoring based on credit history and other pertinent data, and the article presents new information about the distribution of credit scores across population groups and how credit scores relate to the performance of loans. In addition, this article takes a special look at the performance of loans made through nontraditional underwriting practices ...
Trends in home purchase lending: consolidation and the Community Reinvestment Act
Consolidation among banking institutions has substantially changed the structure of the banking industry. Between 1975 and 1997, the number of commercial banks and savings associations declined more than 40 percent. Over the same broad period, the market for home mortgage lending has also changed substantially. Notably, home mortgage lending is no longer primarily the province of banking institutions operating in the communities in which they have banking offices. In recent decades, mortgage and finance companies and banking organizations operating outside their local communities have gained ...
Racial differences in short-run earnings stabilityand implications for credit markets
This paper examines the claim that observed racial differences in rejection rates for mortgage applications, which persist after controlling for many relevant factors, are due to racial differences in short-run earnings stability, which has not typically been included in empirical tests. The evidence does not support the proposition that blacks suffer from greater earnings instability than comparable whites, as few consistent significant differences between black and white earnings volatility are found. Only in the case of drastic earnings shocks with persistent effects does the possibility ...
The performance and profitability of CRA-related lending
In November 1999, the U.S. Congress asked the Board of Governors of the Federal Reserve System to conduct a comprehensive study of loans made under the Community Reinvestment Act of 1977. The Board?s study focused on the loans? delinquency and default rates?their performance?as well as their profitability. This Commentary reports the results of the study.
CRA special lending programs
The Community Reinvestment Act (CRA) of 1977 encourages federally insured banking institutions to help meet the credit needs of their communities, including those of lower-income areas, in a manner consistent with their safe and sound operation. In responding to the CRA, many banking institutions have sought to expand lending to lower-income populations through special lending programs that seek out and assist such borrowers in a variety of ways. These programs, many of which include third parties such as government agencies and nonprofit groups, are often an important element of an ...
Effects of the Community Reinvestment Act (CRA) on Small Business Lending
This study provides new evidence on the effectiveness of the Community Reinvestment Act (CRA) on small business lending by focusing on a sample of neighborhoods with changed CRA eligibility status across the country because of an exogenous policy shock in 2013. The results of difference-in-differences analysis provide consistent evidence that the CRA promotes small business lending, especially in terms of number of loan originations, in lower-income neighborhoods. The generally positive effects of the CRA are sensitive to the types of CRA treatment. Losing CRA eligibility status has a ...