IDEAS home Printed from
   My bibliography  Save this article

The geography of subprime mortgage prepayment penalty patterns


  • John Farris
  • Christopher Richardson


Concern over abusive lending practices in the subprime mortgage market has grown in recent years. This article examines empirically the geographic variation in the use of prepayment penalties, a potentially abusive feature found in most subprime mortgage loans. While controlling for borrower and loan characteristics at the loan level, we use a comprehensive national database to estimate the effects of geography and minority concentration on the probability that subprime borrowers will receive mortgages with prepayment penalties of various lengths. Logistic regression model estimates indicate that, after controlling for a set of underwriting factors, loan type, and minority concentration, rural borrowers with subprime mortgage loans are generally more likely to receive prepayment penalties than their urban counterparts are. In addition, minority concentration shows a consistent, significantly positive correlation with the probability of receiving prepayment penalties. Our results call into question the use of such penalties in the subprime mortgage market.

Suggested Citation

  • John Farris & Christopher Richardson, 2004. "The geography of subprime mortgage prepayment penalty patterns," Housing Policy Debate, Taylor & Francis Journals, vol. 15(3), pages 687-714.
  • Handle: RePEc:taf:houspd:v:15:y:2004:i:3:p:687-714
    DOI: 10.1080/10511482.2004.9521517

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gary Gorton, 2008. "The panic of 2007," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 131-262.
    2. Gary Gorton, 2009. "The Subprime Panic," European Financial Management, European Financial Management Association, vol. 15(1), pages 10-46, January.
    3. Stephen L. Ross, 2005. "The Continuing Practice and Impact of Discrimination," Working papers 2005-19, University of Connecticut, Department of Economics, revised Jul 2006.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:houspd:v:15:y:2004:i:3:p:687-714. 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: . General contact details of provider: .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.