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Subprime Mortgages: What, Where, and to Whom?

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Author Info
Christopher J. Mayer
Karen Pence

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Abstract

We explore the types of data used to characterize risky subprime lending and consider the geographic dispersion of subprime lending. First, we describe the strengths and weaknesses of three different datasets on subprime mortgages using information from LoanPerformance, HUD, and HMDA. These datasets embody different definitions of subprime mortgages. We show that estimates of the number of subprime originations are somewhat sensitive to which types of mortgages are categorized as subprime. Second, we describe what parts of the country and what sorts of neighborhoods had more subprime originations in 2005, and how these patterns differed for purchase and refinance mortgages. Subprime originations appear to be heavily concentrated in fast-growing parts of the country with considerable new construction, such as Florida, California, Nevada, and the Washington DC area. These locations saw house prices rise at faster-than-average rates relative to their own history and relative to the rest of the country. However, this link between construction, house prices, and subprime lending is not universal, as other markets with high house price growth such as the Northeast did not see especially high rates of subprime usage. Subprime loans were also heavily concentrated in zip codes with more residents in the moderate credit score category and more black and Hispanic residents. Areas with lower income and higher unemployment had more subprime lending, but these associations are smaller in magnitude.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14083.

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Date of creation: Jun 2008
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Handle: RePEc:nbr:nberwo:14083

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Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
G2 - Financial Economics - - Financial Institutions and Services
R2 - Urban, Rural, and Regional Economics - - Household Analysis
R31 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Housing Supply and Markets

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  1. Anthony Pennington-Cross & Giang Ho, 2006. "The termination of subprime hybrid and fixed rate mortgages," Working Papers 2006-042, Federal Reserve Bank of St. Louis. [Downloadable!]
  2. Yuliya Demyanyk & Otto Van Hemert, 2007. "Understanding the subprime mortgage crisis," Supervisory Policy Analysis Working Papers 2007-05, Federal Reserve Bank of St. Louis. [Downloadable!]
  3. Bostic, Raphael W. & Engel, Kathleen C. & McCoy, Patricia A. & Pennington-Cross, Anthony & Wachter, Susan M., 2008. "State and local anti-predatory lending laws: The effect of legal enforcement mechanisms," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 47-66. [Downloadable!] (restricted)
  4. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "The 2006 HMDA data," Web Site, Board of Governors of the Federal Reserve System (U.S.), issue Sep. [Downloadable!]
  5. Robert B. Avery & Glenn B. Canner & Robert E. Cook, 2005. "New information reported under HMDA and its application in fair lending enforcement," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sum, pages 344-394. [Downloadable!]
  6. Gabriel, Stuart A. & Rosenthal, Stuart S., 2005. "Homeownership in the 1980s and 1990s: aggregate trends and racial gaps," Journal of Urban Economics, Elsevier, vol. 57(1), pages 101-127, January. [Downloadable!] (restricted)
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