Homebuilders, Affiliated Financing Arms and the Mortgage Crisis

17 Pages Posted: 31 Oct 2011

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Gene Amromin

Federal Reserve Bank of Chicago

Claudine Madras Gartenberg

Wharton

Anna L. Paulson

Federal Reserve Bank of Chicago

Sriram V. Villupuram

University of Texas at Arlington - Department of Finance and Real Estate

Date Written: October 31, 2011

Abstract

Nearly a third of all families purchasing new homes in 2006 obtained a mortgage from a financing company owned or affiliated with a large homebuilder. Corporate parent profits from both the sale of the house and from financing the mortgage, which may lead to less screening of borrowers and mortgage terms to get the deal done. In this paper, we use loan-level data from 2001 to 2008 to investigate the characteristics and default outcomes of home purchase mortgages underwritten by homebuilders, compared to mortgages issued by unaffiliated financial institutions. Our findings indicate that homebuilder financing affiliates do make loans to observably riskier borrowers, but the loans made by homebuilders have lower delinquency rates than unaffiliated lenders, even when loan and borrower characteristics are held constant.

Keywords: Homebuilders, Financial Crisis, Finance Arms of Homebuilders, Household Finance

JEL Classification: G1, G2

Suggested Citation

Agarwal, Sumit and Amromin, Gene and Gartenberg, Claudine Madras and Paulson, Anna L. and Villupuram, Sriram V., Homebuilders, Affiliated Financing Arms and the Mortgage Crisis (October 31, 2011). Available at SSRN: https://ssrn.com/abstract=1952012 or http://dx.doi.org/10.2139/ssrn.1952012

Sumit Agarwal (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Gene Amromin

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
230 S. LaSalle
Chicago, IL 60604
United States
3123225368 (Phone)
3123226011 (Fax)

Claudine Madras Gartenberg

Wharton ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
2158987755 (Phone)

Anna L. Paulson

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312 322 2169 (Phone)

Sriram V. Villupuram

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
77
Abstract Views
966
rank
216,471
PlumX Metrics