Lending to the Poor and Minorities Leading to the Housing Crisis: Was There a Boom?

Abstract

I provide new evidence on the boom and bust in the housing market during the mid-2000s. The boom actually began in the late 1990s, paused briefly in 2001, and then resumed through the mid-2000s. Moreover, the boom was indeed greatly pronounced among lower-income and higher-minority neighborhoods, indicating that mortgage lending expanded for reasons that were unrelated to factors such as an improvement in borrower income prospects or credit quality. These results are consistent with the credit supply view that the boom and bust was caused by an exogenous expansion in the supply of mortgage credit.