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Geographic Consistency of Subprime Loan Features and Foreclosures

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    Abstract

    The recent rise in subprime foreclosures has prompted restrictions at the federal, state, and municipal levels against a range of loan features loosely termed “predatory.” The effectiveness of federal regulation depends on the consistency of those features’ impacts on foreclosures in markets nationwide. Using data on subprime refinance and purchase mortgages in ten metropolitan areas, I examine the impact of long prepayment penalty periods, balloon payments, and reduced documentation on the probability of foreclosure. Results indicate that reduced documentation is consistently associated with higher probabilities of foreclosure, while the impacts of the other features are more sporadic.

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    File URL: http://www.umbc.edu/economics/wpapers/wp_10_118.pdf
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    Bibliographic Info

    Paper provided by UMBC Department of Economics in its series UMBC Economics Department Working Papers with number 09-113.

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    Length: 49 pages
    Date of creation: 01 Jun 2009
    Date of revision: 01 May 2010
    Handle: RePEc:umb:econwp:09113

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    Keywords: subprime mortgages; foreclosure; financial regulation; prepayment penalties; reduced documentation;

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