Mortgage Product Substitution and State Anti-Predatory Lending Laws: Better Loans and Better Borrowers?
Raphael W. Bostic
University of Southern California - Sol Price School of Public Policy
US Department of Treasury - Office of the Comptroller of the Currency (OCC)
Kathleen C. Engel
Suffolk University Law School
Patricia A. McCoy
Boston College Law School
Marquette University - Dept. of Finance
Susan M. Wachter
University of Pennsylvania - Wharton School, Department of Real Estate
May 12, 2009
Atlantic Economic Journal, Vol. 40, p. 273, 2012
U of Penn, Inst for Law & Econ Research Paper No. 09-27
Suffolk University Law School Research Paper No. 09-44
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.
Number of Pages in PDF File: 51
Keywords: Real estate, mortgages, housing, abusive lending, predatory lending, mortgage products, product substitution, adjustment to prohibition
JEL Classification: G21, K29Accepted Paper Series
Date posted: August 26, 2009 ; Last revised: October 24, 2012
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