Housing default: theory works and so does policy
Using a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.richmondfed.org/|
More information through EDIRC
|Order Information:|| Web: http://www.richmondfed.org/publications/ Email: |
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.:
- Goodman, Allen C. & Thibodeau, Thomas G., 1998. "Housing Market Segmentation," Journal of Housing Economics, Elsevier, vol. 7(2), pages 121-143, June.
- Dennis Capozza & Thomas Thomson, 2006. "Subprime Transitions: Lingering or Malingering in Default?," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 241-258, November.
- Alex O. Williams & William Beranek & James Kenkel, 1974. "Default Risk in Urban Mortgages: A Pittsburgh Prototype Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 2(2), pages 101-112.
- Elliehausen, Gregory & Staten, Michael E. & Steinbuks, Jevgenijs, 2008. "The effect of prepayment penalties on the pricing of subprime mortgages," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 33-46.
- Ambrose, Brent W & Buttimer, Richard J, Jr & Capone, Charles A, 1997. "Pricing Mortgage Default and Foreclosure Delay," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 314-25, August.
- von Furstenberg, George M & Green, R Jeffery, 1974. "Home Mortgage Delinquencies: A Cohort Analysis," Journal of Finance, American Finance Association, vol. 29(5), pages 1545-48, December.
- Gregory Elliehausen & Michael E. Staten, 2004. "Regulation of Subprime Mortgage Products: An Analysis of North Carolina's Predatory Lending Law," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 411-433, December.
- Clauretie, Terrence M & Herzog, Thomas N, 1990. "The Effect of State Foreclosure Laws on Loan Losses: Evidence from the Mortgage Insurance Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 221-33, May.
- Keith D. Harvey & Peter J. Nigro, 2003. "How Do Predatory Lending Laws Influence Mortgage Lending in Urban Areas? A Tale of Two Cities," Journal of Real Estate Research, American Real Estate Society, vol. 25(4), pages 479-508.
- Andra C. Ghent & Marianna Kudlyak, 2010. "Recourse and residential mortgage default: theory and evidence from U.S. states," Working Paper 09-10, Federal Reserve Bank of Richmond.
- Kau, James B, et al, 1992. "A Generalized Valuation Model for Fixed-Rate Residential Mortgages," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 279-99, August.
- Ho, Giang & Pennington-Cross, Anthony, 2006.
"The impact of local predatory lending laws on the flow of subprime credit,"
Journal of Urban Economics,
Elsevier, vol. 60(2), pages 210-228, September.
- Giang Ho & Anthony Pennington-Cross, 2006. "The impact of local predatory lending laws on the flow of subprime credit," Working Papers 2006-009, Federal Reserve Bank of St. Louis.
- Chester Foster & Robert Order, 1985. "FHA Terminations: A Prelude to Rational Mortgage Pricing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(3), pages 273-291.
- Xudong An & Raphael Bostic, 2008. "GSE Activity, FHA Feedback, and Implications for the Efficacy of the Affordable Housing Goals," The Journal of Real Estate Finance and Economics, Springer, vol. 36(2), pages 207-231, February.
- James B. Kau & Taewon Kim, 1994. "Waiting to Default: The Value of Delay," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(3), pages 539-551.
- Rose, Morgan J., 2008. "Predatory lending practices and subprime foreclosures: Distinguishing impacts by loan category," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 13-32.
- Kelly D. Edmiston & Roger Zalneraitis, 2007. "Rising foreclosures in the United States: a perfect storm," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 115-145.
- Keith D. Harvey & Peter J. Nigro, 2004. "Do Predatory Lending Laws Influence Mortgage Lending? An Analysis of the North Carolina Predatory Lending Law," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 435-456, December.
- James B. Kau & Donald C. Keenan & Taewon Kim, 1993. "Transaction Costs, Suboptimal Termination and Default Probabilities," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(3), pages 247-263.
- 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.
When requesting a correction, please mention this item's handle: RePEc:fip:fedrwp:10-10. 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: (William Perkins)
If references are entirely missing, you can add them using this form.