No. In this paper we use a regression discontinuity approach to investigate whether affordable housing policies influenced origination or affected the prices of subprime mortgages. We use merged loan-level data on non-prime securitized mortgages with individual-and neighborhood-level data for California and Florida. We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises (GSEs) affordable housing goals or the Community Reinvestment Act. Although the GSEs may have played a role in the crisis, our results indicate that it was not due to their affordable housing mandates.
Congress has enacted laws to encourage lending to low-income households and households that have historically been excluded from mortgage markets because of the neighborhoods in which they live. Some observers have argued that affordable housing policy was a causal factor in the subprime crisis and that the aim of Congress in enacting such policies is more sinister. For instance, writing in the Financial Times, Raghuram Rajan (2010) writes “[t]hetsunami of money directed by a U.S. Congress, worried about growing income inequality, towards expanding low income housing, joined with the flood of foreign capital inflows to remove any discipline on home loans. affordable housing policies played a key role in the subprime crisis. In fall 2011, Michael Bloomberg, the mayor of New York.