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Fraudulent Income Overstatement on Mortgage Applications During the Credit Expansion of 2002 to 2005

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  • Atif Mian
  • Amir Sufi

Abstract

Treating fraudulently overstated income on mortgage applications as true income can lead to incorrect conclusions on the nature of the mortgage credit supply expansion toward marginal borrowers from 2002 to 2005. A positive gap between zip-code-level income growth calculated from mortgage applications and income growth from the IRS likely reflects mortgage fraud, not an improvement in home-buyer income. In support of the credit supply view, mortgage credit for home purchase expanded significantly more in low-credit-score neighborhoods on both the extensive and intensive margins from 2002 to 2005, even though these neighborhoods deteriorated on many measures of income prospects.

Suggested Citation

  • Atif Mian & Amir Sufi, 2017. "Fraudulent Income Overstatement on Mortgage Applications During the Credit Expansion of 2002 to 2005," Review of Financial Studies, Society for Financial Studies, vol. 30(6), pages 1832-1864.
  • Handle: RePEc:oup:rfinst:v:30:y:2017:i:6:p:1832-1864.
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    Cited by:

    1. Giorgio Primiceri & Andrea Tambalotti & Alejandro Justiniano, 2017. "The Mortgage Rate Conundrum," 2017 Meeting Papers 471, Society for Economic Dynamics.
    2. Oleksandr Talavera & Haofeng Xu, 2018. "Role of Verification in Peer-to-Peer Lending," Working Papers 2018-25, Swansea University, School of Management.
    3. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, Elsevier.
    4. Saadi, Vahid, 2016. "Mortgage supply and the US housing boom: The role of the Community Reinvestment Act," SAFE Working Paper Series 155, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    5. Saadi, Vahid, 2016. "Mortgage supply and the US housing boom: The role of the community reinvestment act," IWH Discussion Papers 32/2016, Halle Institute for Economic Research (IWH).

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • D30 - Microeconomics - - Distribution - - - General

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