The varying effects of predatory lending laws on high-cost mortgage applications
AbstractFederal, state, and local predatory lending laws are designed to restrict and in some cases prohibit certain types of high-cost mortgage credit in the subprime market. Empirical evidence using the spatial variation in these laws shows that the aggregate flow of high-cost mortgage credit can increase, decrease, or be unchanged after these laws are enacted. Although it may seem counterintuitive to find that a law that prohibits lending could be associated with more lending, it is hypothesized that a law may reduce the cost of sorting honest loans from dishonest loans and lessen borrowers' fears of predation, thus stimulating the high-cost mortgage market.
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Bibliographic InfoArticle provided by Federal Reserve Bank of St. Louis in its journal Review.
Volume (Year): (2007)
Issue (Month): Jan ()
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