IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

What role did piggyback lending play in the housing bubble and mortgage collapse?

  • LaCour-Little, Michael
  • Calhoun, Charles A.
  • Yu, Wei
Registered author(s):

    We examine the use of simultaneous close junior lien lending ("piggybacks") over the course of the recent housing bubble and subsequent mortgage market collapse. Using both state-level and Zip code-level data over the period 2001-2008, we find that the fraction of piggyback originations is related to higher foreclosure and default rates in subsequent years, and this relation is strongest for non-owner-occupied properties. The pattern, however, appears to be limited to the use of subprime piggybacks, rather than a more general phenomenon. Using a topology-based housing supply elasticity measure as an instrument for house price growth, we further confirm that the strong association of subprime piggyback origination with worse loan performance was not driven by the endogeneity of house price appreciation.

    If 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.

    File URL: http://www.sciencedirect.com/science/article/pii/S1051137711000040
    Download Restriction: Full text for ScienceDirect subscribers only

    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.

    Article provided by Elsevier in its journal Journal of Housing Economics.

    Volume (Year): 20 (2011)
    Issue (Month): 2 (June)
    Pages: 81-100

    as
    in new window

    Handle: RePEc:eee:jhouse:v:20:y:2011:i:2:p:81-100
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622881

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    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.
    2. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
    3. Agarwal, Sumit & Ambrose, Brent W. & Chomsisengphet, Souphala & Liu, Chunlin, 2006. "An empirical analysis of home equity loan and line performance," Journal of Financial Intermediation, Elsevier, vol. 15(4), pages 444-469, October.
    4. Karen M. Pence, 2006. "Foreclosing on Opportunity: State Laws and Mortgage Credit," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 177-182, February.
    5. Michael LaCour-Little, 2004. "Equity Dilution: An Alternative Perspective on Mortgage Default," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(3), pages 359-384, 09.
    6. Coleman IV, Major & LaCour-Little, Michael & Vandell, Kerry D., 2008. "Subprime lending and the housing bubble: Tail wags dog?," Journal of Housing Economics, Elsevier, vol. 17(4), pages 272-290, December.
    7. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
    8. Glenn B. Canner & Thomas A. Durkin & Charles A. Luckett, 1998. "Recent developments in home equity lending," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 241-251.
    9. Glenn B. Canner & Charles A. Luckett, 1994. "Home equity lending: evidence from recent surveys," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 571-583.
    10. Agarwal, Sumit & Ambrose, Brent W. & Liu, Chunlin, 2006. "Credit Lines and Credit Utilization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 1-22, February.
    11. Mark Doms & Fred Furlong & John Krainer, 2007. "Subprime mortgage delinquency rates," Working Paper Series 2007-33, Federal Reserve Bank of San Francisco.
    12. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 351-380.
    13. Glenn B. Canner & James T. Fergus & Charles A. Luckett, 1988. "Home equity lines of credit," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 361-373.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jhouse:v:20:y:2011:i:2:p:81-100. See general 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: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.