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Subprime mortgages, foreclosures, and urban neighborhoods

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  • Kristopher S. Gerardi
  • Paul S. Willen

Abstract

This paper analyzes the impact of the subprime mortgage crisis on urban neighborhoods in Massachusetts. We explore the topic using a data set that matches race and income information from Home Mortgage Disclosure Act data with property-level, transaction data from Massachusetts Registry of Deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proved exceptionally unstable in the face of rapid price declines. The evidence in Massachusetts suggests that subprime lending did not, as commonly believed, lead to a substantial increase in homeownership by minorities but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies.

Suggested Citation

  • Kristopher S. Gerardi & Paul S. Willen, 2009. "Subprime mortgages, foreclosures, and urban neighborhoods," FRB Atlanta Working Paper 2009-01, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2009-01
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Charles Towe & Chad Lawley, 2013. "The Contagion Effect of Neighboring Foreclosures," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 313-335, May.
    2. Janet Currie & Erdal Tekin, 2015. "Is There a Link between Foreclosure and Health?," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 63-94, February.
    3. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2016. "The Vulnerability of Minority Homeowners in the Housing Boom and Bust," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 1-27, February.
    4. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2014. "Race, Ethnicity and High Cost Mortgage Lending," Working papers 2014-36, University of Connecticut, Department of Economics.
    5. Christopher Foote & Kristopher Gerardi & Lorenz Goette & Paul Willen, 2010. "Reducing Foreclosures: No Easy Answers," NBER Chapters,in: NBER Macroeconomics Annual 2009, Volume 24, pages 89-138 National Bureau of Economic Research, Inc.
    6. repec:kap:jrefec:v:55:y:2017:i:4:d:10.1007_s11146-016-9585-9 is not listed on IDEAS
    7. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2016. "What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders," Working Papers 2016-005, Human Capital and Economic Opportunity Working Group.
    8. Chakrabarti, Prabal, 2009. "Massachusetts’ efforts to address foreclosed properties," Community Development Investment Review, Federal Reserve Bank of San Francisco, issue 1, pages 65-72.
    9. repec:fip:fedreq:00044 is not listed on IDEAS
    10. Adelino, Manuel & Gerardi, Kristopher & Willen, Paul S., 2013. "Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 835-853.
    11. Christopher L. Foote & Lara Loewenstein & Paul S. Willen, 2016. "Cross-Sectional Patterns of Mortgage Debt during the Housing Boom: Evidence and Implications," NBER Working Papers 22985, National Bureau of Economic Research, Inc.
    12. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Doviak, Eric & MacDonald, Sean, 2011. "Who defaults on their home mortgage?," MPRA Paper 34275, University Library of Munich, Germany.
    14. repec:kap:poprpr:v:36:y:2017:i:4:d:10.1007_s11113-017-9429-1 is not listed on IDEAS
    15. Sorenson, David J., 2015. "Loan Characteristics, Borrower Traits, and Home Mortgage Foreclosures: The Case of Sioux Falls, South Dakota," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(2).

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    Keywords

    Subprime mortgage ; Foreclosure ; Urban economics;

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