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Community Reinvestment and Credit Risk: Evidence from an Affordable Home Loan Program

Author

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  • Paul S. Calem
  • Susan Wachter

Abstract

This paper examines the performance of home purchase loans originated by a major depository institution in Philadelphia under a flexible lending program between 1988 and 1994. The authors examine long-term delinquency in relation to neighborhood housing market conditions, borrower credit history scores, and other factors. The authors find that likelihood of delinquency declines with the level of neighborhood housing market activity. The authors also find that the likelihood of delinquency is greater for borrowers with low credit history scores and those with high ratios of housing expense to income, and when the property is unusually expensive for the neighborhood where it is located.

Suggested Citation

  • Paul S. Calem & Susan Wachter, 1998. "Community Reinvestment and Credit Risk: Evidence from an Affordable Home Loan Program," Zell/Lurie Center Working Papers 306, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  • Handle: RePEc:wop:pennzl:306
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    Cited by:

    1. Michelle A. Danis & Anthony Pennington-Cross, 2005. "A dynamic look at subprime loan performance," Working Papers 2005-029, Federal Reserve Bank of St. Louis.
    2. Roberto G. Quercia & Anthony Pennington-Cross & Chao Yue Tian, 2016. "Differential Impacts of Structural and Cyclical Unemployment on Mortgage Default and Prepayment," The Journal of Real Estate Finance and Economics, Springer, vol. 53(3), pages 346-367, October.
    3. Bandyopadhyay, Arindam & Kuvalekar, S V & Basu, Sanjay & Baid, Shilpa & Saha, Asish, 2008. "A Study of Residential Housing Demand in India," MPRA Paper 9339, University Library of Munich, Germany.
    4. Danis, Michelle A. & Pennington-Cross, Anthony, 2008. "The delinquency of subprime mortgages," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 67-90.
    5. Harrison, David M., 2001. "The Importance of Lender Heterogeneity in Mortgage Lending," Journal of Urban Economics, Elsevier, vol. 49(2), pages 285-309, March.
    6. Neil Bhutta, 2011. "The Community Reinvestment Act and Mortgage Lending to Lower Income Borrowers and Neighborhoods," Journal of Law and Economics, University of Chicago Press, vol. 54(4), pages 953-983.
    7. repec:bap:journl:170404 is not listed on IDEAS
    8. Bandyopadhyay, Arindam & Saha, Asish, 2009. "Factors Driving Demand and Default Risk in Residential Housing Loans: Indian Evidence," MPRA Paper 14352, University Library of Munich, Germany.
    9. Neil Bhutta, 2008. "Giving credit where credit is due? the Community Reinvestment Act and mortgage lending in lower-income neighborhoods," Finance and Economics Discussion Series 2008-61, Board of Governors of the Federal Reserve System (U.S.).

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