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Income, Location and Default: Some Implications for Community Lending

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  • Robert Order
  • Peter Zorn

Abstract

This paper investigates differences in default losses across income groups and neighborhoods, in an effort to see if there are significant differences between default experience on loans to low-income households or low-income neighborhoods and other loans. We find that while defaults and losses are somewhat higher in low-income neighborhoods, default behavior is similar in the sense that responses to negative equity are similar across neighborhoods, and remaining differences are small and might be explained by omitted variables such as those measuring credit history. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Robert Order & Peter Zorn, 2000. "Income, Location and Default: Some Implications for Community Lending," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(3), pages 385-404.
  • Handle: RePEc:bla:reesec:v:28:y:2000:i:3:p:385-404
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    Cited by:

    1. James Kau & Donald Keenan & Henry Munneke, 2012. "Racial Discrimination and Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 289-304, August.
    2. Chan, Sewin & Gedal, Michael & Been, Vicki & Haughwout, Andrew, 2013. "The role of neighborhood characteristics in mortgage default risk: Evidence from New York City," Journal of Housing Economics, Elsevier, vol. 22(2), pages 100-118.
    3. Hartarska, Valentina M. & Gonzalez-Vega, Claudio, 2002. "A Comparison Of Option-Theoretic And Choice-Theoretic Approaches To Evaluating Alternative Financial Technologies For Mortgage Loans To Low-Income Households," 2002 Annual meeting, July 28-31, Long Beach, CA 19645, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Agata M. Lozinskaia & Evgeniy M. Ozhegov & Alexander M. Karminsky, 2016. "Discontinuity in Relative Credit Losses: Evidence from Defaults on Government-Insured Residential Mortgages," HSE Working papers WP BRP 55/FE/2016, National Research University Higher School of Economics.
    5. Hartarska, Valentina & Gonzalez-Vega, Claudio, 2006. "Evidence on the effect of credit counseling on mortgage loan default by low-income households," Journal of Housing Economics, Elsevier, vol. 15(1), pages 63-79, March.
    6. repec:bap:journl:170302 is not listed on IDEAS
    7. Amy Cutts & Robert Order, 2004. "On the Economics of Subprime Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 30(2), pages 167-196, November.
    8. John Gilderbloom & Katrina Anaker & Gregory Squires & Matt Hanka & Joshua Ambrosius, 2011. "Why Foreclosure Rates in African American Neighborhoods are so High: Looking at the Real Reaonss," ERSA conference papers ersa11p1597, European Regional Science Association.
    9. Hartarska, Valentina M. & Gonzalez-Vega, Claudio, 2001. "Credit Counseling And Mortgage Loan Default By Rural And Urban Low Income Households," 2001 Annual meeting, August 5-8, Chicago, IL 20740, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Nothaft, Frank E. & Perry, Vanessa G., 2002. "Do mortgage rates vary by neighborhood? Implications for loan pricing and redlining," Journal of Housing Economics, Elsevier, vol. 11(3), pages 244-265, September.

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