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Loan Characteristics, Borrower Traits, and Home Mortgage Foreclosures: The Case of Sioux Falls, South Dakota

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  • Sorenson, David J.

Abstract

Foreclosure starts on loans made between 2004 and 2007 in Sioux Falls, South Dakota, are examined using a combination of local and Home Mortgage Disclosure Act (HMDA) data, expanding on previous research restricted to a single year’s loans using an alternative meth-odology. Specifically, foreclosed loans are identified from local lis pendens records, and loans are matched with corresponding records in the HMDA database to provide borrower and loan characteristics for further analysis. The research employs limited dependent variable models to assess the effect of loan, demographic, and neighborhood characteristics on the likelihood of foreclosure. Key loan characteristics such as subprime interest rate, loan-to-value ratio, and additional loans at the time of the mortgage were found to have a significant effect on foreclosure starts. Minority borrowers were also found to have a significantly higher probability of foreclosure.

Suggested Citation

  • Sorenson, David J., 2015. "Loan Characteristics, Borrower Traits, and Home Mortgage Foreclosures: The Case of Sioux Falls, South Dakota," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(2).
    • Handle: RePEc:ags:jrapmc:243988
    DOI: 10.22004/ag.econ.243988
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    References listed on IDEAS

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    1. Anthony Pennington-Cross, 2010. "The Duration of Foreclosures in the Subprime Mortgage Market: A Competing Risks Model with Mixing," The Journal of Real Estate Finance and Economics, Springer, vol. 40(2), pages 109-129, February.
    2. Meagan E. Cahill & Rachel S. Franklin, 2013. "The Minority Homeownership Gap, Home Foreclosure, And Nativity: Evidence From Miami-Dade County," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 91-117, February.
    3. Gerardi Kristopher & Willen Paul, 2009. "Subprime Mortgages, Foreclosures, and Urban Neighborhoods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-37, March.
    4. Kashian, Russell & Cebula, Richard & Peterson, Jeremy, 2015. "A Duration Analysis of Foreclosures to Sheriff Sales in Light of the Financial Crisis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(2).
    5. Reynold Nesiba & David Sorenson & Kaleb Sturm, 2012. "Who Is Foreclosing on Whom? Home Mortgage Lending and Foreclosures In Sioux Falls, South Dakota, 2004-2010," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(2), pages 323-332.
    6. Brent W. Ambrose & Charles A. Capone, 1998. "Modeling the Conditional Probability of Foreclosure in the Context of Single‐Family Mortgage Default Resolutions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(3), pages 391-429, September.
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    Cited by:

    1. Nora Azureen Abdul Rahman & Zunarni Kosim & Siew Goh Yeok, 2018. "The Characteristics of Household Loans in Conventional and Islamic Banks in Malaysia," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(7), pages 531-541, July.

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