The Impact of Anti-Predatory Lending Laws on Mortgage Volume∗
نویسنده
چکیده
In this paper, I test the hypothesis that anti-predatory lending laws inhibited the volume of mortgage lending during the housing-bubble period. I use cross-state variation in the strictness of these laws and their application only to mortgage refinancing as opposed to home purchases to develop a difference-in-difference estimate of the impact of these laws on mortgage volume. Consistent with my hypothesis, I find that states with stricter laws had lower mortgage refinancing volume but exhibited no difference in home purchase mortgage volume. I also test whether by restricting mortgage refinancing, these laws impacted household expenditures and find that the laws reduced household expenditures. ∗I thank my advisor, Harrison Hong, for invaluable advice and support. I am also grateful to seminar participants at Princeton University for helpful comments. All errors are my own. †Address: The Bendheim Center for Finance, 26 Prospect Ave, Princeton University, Princeton, NJ 08540-5296. Email: [email protected]
منابع مشابه
The Impact of State Anti-predatory Lending Laws on the Foreclosure Crisis
By the end of 2007, thirty states and the District of Columbia had passed some sort of subprime mortgage regulation statute, while the remaining states left the subprime mortgage market unregulated. Were these state mortgage laws effective in restraining risky mortgage lending and mitigating the surge in foreclosures? Our study takes advantage of this natural experiment and compares loan terms,...
متن کاملPrepayment Penalties: Efficiency and Predation
This paper presents evidence that reductions in mortgage interest rates associated with prepayment penalties are greater for riskier borrowers, as measured by mortgage type, credit scores, and local incomes and education levels. This is consistent with an efficiency view that, by reducing the reclassification risk faced by lenders, prepayment penalties can be welfareimproving. Additional findin...
متن کاملCredit-Induced Boom and Bust∗
Can a credit expansion induce a boom and bust in house prices and real economic activity? This paper exploits the federal preemption of national banks from local laws against predatory lending to gauge the effect of the supply of credit on the real economy. Specifically, we exploit the heterogeneity in the market share of national banks across counties in 2003 and that in state anti-predatory l...
متن کاملReducing Home Mortgage Foreclosures in a Predatory Lending Environment: a Case Study of Mid-sized City in Central New York
This article discusses the growing problem of predatory lending, particularly in low-income, inner city neighborhoods, with a case study of communities in Syracuse, New York. The author documents mortgage lending activities and foreclosure patterns in central New York and argues for continued education throughout the home-buying process. A program that reduced foreclosures in low-income urban n...
متن کاملWorking Paper No. 06-2 Predatory Lending in a Rational World
Regulators express growing concern over “predatory lending,” which we take to mean lending that reduces the expected utility of borrowers. We present a rational model of consumer credit in which such lending is possible, and we identify the circumstances in which it arises with and without competition. Predatory lending is associated with imperfect competition, highly collateralized loans, and ...
متن کامل