Predatory Lending Practices and Subprime Foreclosures: Distinguishing Impacts by Loan Category

Posted: 21 Jul 2011

See all articles by Morgan J. Rose

Morgan J. Rose

University of Maryland, Baltimore County; Office of the Comptroller of the Currency

Date Written: 2008

Abstract

A recent dramatic rise in subprime foreclosures has led to calls for restrictions against a range of loan features loosely termed “predatory.” Several cities and states have enacted regulations to curb predatory practices, and some advocacy groups endorse action at the federal level. Using data on subprime refinance and purchase mortgages from the Chicago metropolitan area, I examine the impact of long prepayment penalty periods, balloon payments and reduced documentation on the probability of foreclosure. Results suggest that the relationship between these loan features and foreclosure rates is much more complicated than the arguments for restricting their use assume.

Keywords: Predatory lending, subprime, mortgage, foreclosure

JEL Classification: D18, G01, G21, G28, R31

Suggested Citation

Rose, Morgan J., Predatory Lending Practices and Subprime Foreclosures: Distinguishing Impacts by Loan Category (2008). Journal of Economics and Business, Vol. 60, Nos. 1-2, 2008. Available at SSRN: https://ssrn.com/abstract=1890699

Morgan J. Rose (Contact Author)

University of Maryland, Baltimore County ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-8485 (Phone)

Office of the Comptroller of the Currency

400 7th Street SW
Washington, DC 20219
United States

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