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Subprime mortgage lending in New York City: prevalence and performance

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  • Ebiere Okah
  • James Orr

Abstract

Subprime mortgage lending expanded in New York City between 2004 and mid-2007, and delinquencies on these subprime loans have been rising sharply. We use a rich, loan-level data set of the city's outstanding subprime loans as of January 2009 to describe the main features of this lending and to model the performance of these loans. These subprime loans represent a smaller share of total housing units in the city than is true nationwide. In addition, they are found to be clustered in neighborhoods where average borrower credit quality is low and, unlike prime mortgage loans, where African-Americans and Hispanics constitute relatively large shares of the population. We estimate a model of the likelihood that these loans will become seriously delinquent and find a significant role for credit quality of borrowers, debt-to-income and loan-to-value ratios at the time of loan origination, and estimates of the loss of home equity.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 432.

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Date of creation: 2010
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Handle: RePEc:fip:fednsr:432

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Related research

Keywords: Subprime mortgage ; Financial risk management ; Consumer credit ; Demography;

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Cited by:
  1. Arthur Korteweg & Morten Sorensen, 2012. "Estimating Loan-to-Value and Foreclosure Behavior," NBER Working Papers 17882, National Bureau of Economic Research, Inc.
  2. Chan, Sewin & Gedal, Michael & Been, Vicki & Haughwout, Andrew, 2013. "The role of neighborhood characteristics in mortgage default risk: Evidence from New York City," Journal of Housing Economics, Elsevier, vol. 22(2), pages 100-118.

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