The Neighborhood Distribution of Subprime Mortgage Lending
AbstractSubprime lending in the residential mortgage market, characterized by relatively high credit risk and high interest rates or fees, has become a prominent segment of the market in the last ten years. Research indicates there is geographical concentration of subprime mortgages in Census tracts comprising high concentrations of low-income and minority households. The growth in subprime lending represents an expansion of mortgage credit among households who do not meet prime market underwriting standards. Nonetheless, its apparent concentration in minority and lower-income neighborhoods has generated concerns that households in these areas may not be obtaining equal opportunity in the prime mortgage market, hence undermining efforts to revitalize minority and lower-income areas. This paper examines the robustness of previous findings of minority and low-income concentration, but also adds to the existing literature. We selected Chicago and Philadelphia as the subjects of this study. The city-level analysis allows us to identify factors associated with within-city concentrations of subprime loans and eliminates the need to control for systematic differences in lending patterns across cities. Second, we investigate the spatial concentration of subprime lending across Census tracts within each city more closely than previous studies, by examining its spatial association with risk measures along with tract demographic variables. The incorporated tract-level risk variables include the proportion of individuals (of borrowing age) that have low credit ratings and the proportion without ratings, based on data from a major national credit bureau. Third, we supplement the analysis of subprime distribution across Census tracts with a logit regression analysis at the borrower level, where we relate whether the loan obtained was subprime to both tract and borrower characteristics. Our goal is to provide a broad overview of within-city, cross-neighborhood subprime lending patterns, making the best use of available data.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania in its series Zell/Lurie Center Working Papers with number 404.
Date of creation:
Date of revision:
Contact details of provider:
Postal: 256 South 37th Street, Philadelphia, PA 19104-6330
Web page: http://zell-lurie-center.wharton.upenn.edu/working.html
More information through EDIRC
Other versions of this item:
- Paul S. Calem & Kevin Gillen & Susan Wachter, 2004. "The Neighborhood Distribution of Subprime Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 393-410, December.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.