How Do Regulators Influence Mortgage Risk?
Download Document| Date Published | 2013 |
| Version | |
| Primary Author | John Y. Campbell, Tarun Ramadorai, and Benjamin Ranish |
| Other Authors | |
| Theme | Regulation and Supervision of Housing Finance Systems |
| Country | India |
Abstract
We employ loan-level data on over a million loans disbursed in India between 1995 and 2010 to understand how fast-changing regulation impacted mortgage lending and risk. Our methodology offers an alternative to regression discontinuity analysis that applies even when regulations create no discontinuities in the cross-section. We use cross-sectional differences in the time-series variation of delinquency rates, conditional on initial interest rates, to detect the effects of regulations favoring smaller loans. We also found that a change in the classification of non-performing assets reduced both delinquency probabilities and losses given delinquency.