Predatory Lending and the Subprime Crisis
AbstractWe measure the effect of an anti-predatory pilot program (Chicago, 2006) on mortgage default rates to test whether predatory lending was a key element in fueling the subprime crisis. Under the program, risky borrowers and/or risky mortgage contracts triggered review sessions by housing counselors who shared their findings with the state regulator. The pilot cut market activity in half, largely through the exit of lenders specializing in risky loans and through decline in the share of subprime borrowers. Our results suggest that predatory lending practices contributed to high mortgage default rates among subprime borrowers, raising them by about a third.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19550.
Date of creation: Oct 2013
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- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-25 (All new papers)
- NEP-BAN-2013-10-25 (Banking)
- NEP-URE-2013-10-25 (Urban & Real Estate Economics)
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