This article uses a unique demonstration program to examine the interaction of CRA-related lending with subprime and FHA lending activity. Specifically, the empirical analysis identifies the extent to which the origination of a CRA mortgage substitutes for FHA and subprime originations during the period 1998-2006.
Author: Jonathan Spader
The interaction of credit scoring with risk-based pricing has the potential for credit scoring to contribute to the segmentation of low- and high-cost credit markets, specifically, as a mechanism through which credit scores may capture disparities in surrounding credit markets and pass them into future periods and other credit markets.
In the years prior to the expansion of the subprime market, a small portion of community reinvestment loans are found to substitute for FHA originations while a much larger substitution effect is found with respect to high-cost originations during the years of the subprime industry‟s growth.