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Does mortgage deregulation increase foreclosures? Evidence from Cleveland

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  • Xu, Yilan

Abstract

This paper examines how relaxing a local anti-predatory lending law for mortgages affects foreclosures. The empirical evidence is drawn from a quasi experiment in Cleveland, Ohio, where the State Supreme Court repealed an ordinance that imposed lending restrictions on home mortgages of high annual percentage rates (APRs). Empirical evidence shows that observable loan and borrower characteristics were not affected by the repeal, nor did the overall originations appear to increase; yet the APRs were 20% more likely to exceed the regulatory thresholds that were nullified. Moreover, the foreclosure rate increased by six percentage points to 20%.

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  • Xu, Yilan, 2014. "Does mortgage deregulation increase foreclosures? Evidence from Cleveland," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 126-139.
    • Handle: RePEc:eee:regeco:v:46:y:2014:i:c:p:126-139
    DOI: 10.1016/j.regsciurbeco.2014.03.003
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    References listed on IDEAS

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    Cited by:

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    2. Xu, Minhong & Xu, Yilan, 2023. "Do non-damaging earthquakes shake mortgage lenders' risk perception?," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    3. James Tan & Siew Ann Cheong, 2016. "The Regime Shift Associated with the 2004–2008 US Housing Market Bubble," PLOS ONE, Public Library of Science, vol. 11(9), pages 1-8, September.
    4. Mandai, Yu & Nakabayashi, Masaki, 2018. "Stabilize the peasant economy: Governance of foreclosure by the shogunate," Journal of Policy Modeling, Elsevier, vol. 40(2), pages 305-327.
    5. Steinbuks, Jevgenijs, 2015. "Effects of prepayment regulations on termination of subprime mortgages," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 445-456.

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    More about this item

    Keywords

    Mortgage regulation; Home foreclosures; Consumer financial protection; Predatory lending;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K39 - Law and Economics - - Other Substantive Areas of Law - - - Other
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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