Abstract

http://ssrn.com/abstract=2055889
 
 

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Predatory Lending and the Subprime Crisis


Sumit Agarwal


National University of Singapore

Itzhak Ben-David


Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Gene Amromin


Federal Reserve Bank of Chicago

Souphala Chomsisengphet


US Department of Treasury - Office of the Comptroller of the Currency (OCC)

Douglas D. Evanoff


Federal Reserve Bank of Chicago

October 3, 2013

Journal of Financial Economics (JFE), Forthcoming
Fisher College of Business Working Paper No. 2012-03-008
Charles A. Dice Center Working Paper No. 2012-8

Abstract:     
We measure the effect of an anti-predatory pilot program (Chicago, 2006) on mortgage default rates to test whether predatory lending was a key element in fueling the subprime crisis. Under the program, risky borrowers and/or risky mortgage contracts triggered review sessions by housing counselors who shared their findings with the state regulator. The pilot cut market activity in half, largely through the exit of lenders specializing in risky loans and through decline in the share of subprime borrowers. Our results suggest that predatory lending practices contributed to high mortgage default rates among sub prime borrowers, raising them by about a third.

Number of Pages in PDF File: 56

Keywords: Predatory lending, subprime crisis, household finance, default

JEL Classification: D14, D18

Accepted Paper Series





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Date posted: May 10, 2012 ; Last revised: February 11, 2014

Suggested Citation

Agarwal, Sumit and Ben-David, Itzhak and Amromin, Gene and Chomsisengphet, Souphala and Evanoff, Douglas D., Predatory Lending and the Subprime Crisis (October 3, 2013). Journal of Financial Economics (JFE), Forthcoming; Fisher College of Business Working Paper No. 2012-03-008 ; Charles A. Dice Center Working Paper No. 2012-8. Available at SSRN: http://ssrn.com/abstract=2055889

Contact Information

Sumit Agarwal
National University of Singapore ( email )
15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)
HOME PAGE: http://www.ushakrisna.com
Itzhak Ben-David (Contact Author)
Ohio State University - Fisher College of Business, Finance Department ( email )
2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/
Gene Amromin
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
230 S. LaSalle
Chicago, IL 60604
United States
3123225368 (Phone)
3123226011 (Fax)
Souphala Chomsisengphet
US Department of Treasury - Office of the Comptroller of the Currency (OCC) ( email )
400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)
Douglas D. Evanoff
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604
United States
312-322-5814 (Phone)
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