Trends in Neighborhood Income Levels: Evidence from the Community Reinvestment Act
*Names in bold indicate Presenter
The CRA lending exams that banks complete do not differentiate between lending to a low- or moderate- income (LMI) buyer or lending to a relatively wealthier borrower who is purchasing a home in a low- or moderate- income census tract. This is an important distinction. Therefore, in order to better gauge what is driving the median income growth in CRA eligible tracts I repeat the analysis using the Home Mortgage Disclosure Act (HMDA) data. A regression discontinuity model is applied to borrower income data in order to test for any discontinuity around the CRA eligibility threshold. The results are consistent in that an effect is observed in larger metropolitan areas. These results support the idea that examiners should differentiate between LMI borrowers and LMI neighborhoods.