Abstract

http://ssrn.com/abstract=1688033
 
 

References (29)



 
 

Citations (2)



 


 



What Role Did Piggyback Lending Play in the Housing Bubble and Mortgage Collapse?


Michael LaCour-Little


California State University at Fullerton

Charles A. Calhoun


Calhoun Consulting

Wei Yu


California State Polytechnic University, Pomona

October 5, 2010


Abstract:     
We examine the use of simultaneous close junior lien lending (“piggybacks”) over the course of the recent housing bubble and subsequent mortgage market collapse. Using both state-level and zip code-level data over the period 2001-2008, we find that the fraction of piggyback originations is related to higher foreclosure and default rates in subsequent years, and this relation is strongest for non-owner occupied properties. The pattern, however, appears to be limited to the use of subprime piggybacks, rather than a more general phenomenon. Using a topology-based housing supply elasticity measure as an instrument for house price growth, we further confirm that the strong association of subprime piggyback origination with worse loan performance was not driven by the endogeneity of house price appreciation.

Number of Pages in PDF File: 55

Keywords: mortgage, foreclosure, housing, piggyback lending

JEL Classification: G01, G21, R31

working papers series


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Date posted: October 7, 2010  

Suggested Citation

LaCour-Little, Michael and Calhoun, Charles A. and Yu, Wei, What Role Did Piggyback Lending Play in the Housing Bubble and Mortgage Collapse? (October 5, 2010). Available at SSRN: http://ssrn.com/abstract=1688033 or http://dx.doi.org/10.2139/ssrn.1688033

Contact Information

Michael LaCour-Little (Contact Author)
California State University at Fullerton ( email )
5133 Mihaylo Hall
Fullerton, CA 92834-6848
United States
657-278-4014 (Phone)
657-278-2161 (Fax)
Charles A. Calhoun
Calhoun Consulting ( email )
4837 King Solomon Drive
Annandale, VA 22003
United States
703-978-3495 (Phone)
703-978-1933 (Fax)
Wei Yu
California State Polytechnic University, Pomona ( email )
3801 W. Temple Avenue Pomona
Pomona, CA 91768
United States
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