Housing default: theory works and so does policy
AbstractUsing a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 10-10.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-24 (All new papers)
- NEP-RMG-2010-07-24 (Risk Management)
- NEP-URE-2010-07-24 (Urban & Real Estate Economics)
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