Portfolio Adjustment to Home Equity Accumulation among CRA Borrowers

This paper identifies the financial implications of equity accumulation for low- and moderate-income (LMI) borrowers. The analysis examines whether the accumulation of equity crowds out other investments, as well as whether equity is substantially extracted through other borrowing. The data come from a unique panel study of Community Reinvestment Act (CRA) borrowers and matched renters. A copula modeling approach estimates the distribution of a financial portfolio; the distribution is used to simulate the effect of equity accumulation on the portfolios of the renters. The analysis reveals no evidence that equity accumulation crowds out other investments, or that CRA beneficiaries deplete equity through borrowing.