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Mortgage Product Substitution and State Anti-Predatory Lending Laws: Better Loans and Better Borrowers?
Raphael W. Bostic University of Southern California - School of Policy Planning and Development (SPPD) Souphala Chomsisengphet Office of the Comptroller of the Currency - Credit Risk Analysis Division Kathleen C. Engel Suffolk University Law School (eff. 7/1/09) Patricia A. McCoy University of Connecticut - School of Law Anthony Pennington-Cross Marquette University - Dept. of Finance Susan M. Wachter University of Pennsylvania - The Wharton School - Real Estate Department May 12, 2009 U of Penn, Inst for Law & Econ Research Paper No. 09-27 Suffolk University Law School Research Paper No. 09-44 Abstract: Mounting foreclosures and recent disclosures of abusive lending practices have led many states to adopt new anti-predatory lending laws. Researchers have examined the impact of such laws on credit flows and the cost of credit. This research extends the literature by examining if the market responded to these laws by substituting different mortgage products for those restricted by anti-predatory lending provisions. The evidence indicates that the new laws were effective in restricting loans with targeted characteristics and that the market substituted other product types to maintain affordability in the face of these restrictions.
Keywords: Real estate, mortgages, housing, abusive lending, predatory lending, mortgage products, product substitution, adjustment to prohibition JEL Classifications: G21, K29 Working Paper SeriesDate posted: August 26, 2009 ; Last revised: October 02, 2009Suggested CitationContact Information
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