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

This study examines the performance of home purchase loans originated by a major depository institution in Philadelphia under a flexible lending program between 1988 and 1994. We examine long‐term delinquency in relation to neighborhood housing market conditions, borrower credit‐history scores and other factors. We find that likelihood of delinquency declines with increasing neighborhood housing market activity. Also, 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.