REFinBlog

Editor: David Reiss
Brooklyn Law School

October 31, 2022

Improving Minority and Low-Income Homeownership Experiences

By David Reiss

 

By ajay_suresh - Federal Reserve Bank of Chicago, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=110893107

The Federal Reserve Bank of Chicago

I participated in a very interesting event at the Chicago Fed last week: Risk and Racial bias: Workshop improving Minority and Low-Income Homeownership Experiences. The Community Development and Policy Studies (CDPS) team at the Chicago Fed sponsored the workshop. CDPS is specifically focused on the risks of homeownership, bias in housing and financial markets, how risk and bias interact to affect homeownership experiences for minority or low-income families, and how risks are shared among market participants.

The workshop featured papers from “researchers in the social sciences and law using a range of methodological approaches on questions related to homeownership as a means of wealth accumulation and the experiences of minority and low-income families.”

I was a discussant for an interesting paper, Strategically Staying Small: Regulatory Avoidance and the CRA by Jacelly Cespedes et al. (she presented the paper). The abstract reads

Using the introduction of an asset based two-tiered evaluation scheme in the 1995 CRA reform, we examine the consequences of regulatory avoidance. Banks exploit the attribute-based regulation by strategically slowing asset growth, bunching below the $250M threshold. The regulatory avoidance also produces real effects. Banks near the threshold experience an increase in the rejection rate of LMI loans, while areas they serve experience a decline in county-level small establishment shares and independent innovation. These results highlight a bank’s willingness to take costly actions to avoid regulatory oversight and subsequent credit reduction for individuals whom the CRA is designed to benefit.

The most recent version of the paper does not seem to be publicly available, but an earlier draft can be found here.

 

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