Community Reinvestment and Credit Risk: Evidence from an Affordable Home Loan Program

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Abstract
This paper examines the performance of home purchase loans originated by a major depository institution in Philadelphia under a flexible lending program between 1988 and 1994. The authors examine long-term delinquency in relation to neighborhood housing market conditions, borrower credit history scores, and other factors. The authors find that likelihood of delinquency declines with the level of neighborhood housing market activity. The authors also find that the likelihood of delinquency is greater for borrowers with low credit history scores and those with high ratios of housing expense to income, and when the property is unusually expensive for the neighborhood where it is located.
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