Does Mandatory Disclosure Affect Subprime Lending to Minority Neighborhoods?

39 Pages Posted: 26 Jul 2013

See all articles by Zsuzsa R. Huszar

Zsuzsa R. Huszar

National University of Singapore ; Central European University

George H. Lentz

California State Polytechnic University, Pomona

Wei Yu

California State Polytechnic University, Pomona

Date Written: Sept 10, 2010

Abstract

We examine changes in lending behavior in response to the Federal Reserve’s requirement to disclosure of loan pricing information implemented in 2004 for depository and nondepository residential lending institutions. We find that although subprime approval rates generally increased after 2004 as the housing market boomed, there was nonetheless a reduction in subprime approval rates to minority neighborhoods following implementation of the pricing disclosure requirement. We also find that the change in lending practices after the implementation of disclosure requirement was stronger for depository institutions than for nondepository institutions. Moreover, we find that depository institutions with good regulator reviews for effectively serving the financing needs of local communities are less likely to issue higher-priced subprime loans.

Keywords: depository institutions, nondepository institutions, information disclosure, subprime mortgage lending

JEL Classification: G01, G21, G14

Suggested Citation

Huszar, Zsuzsa R. and Huszar, Zsuzsa R. and Lentz, George H. and Yu, Wei, Does Mandatory Disclosure Affect Subprime Lending to Minority Neighborhoods? (Sept 10, 2010). Journal of Economics and Finance, Vol. 36, No. 4, 2012, Available at SSRN: https://ssrn.com/abstract=2298592

Zsuzsa R. Huszar (Contact Author)

National University of Singapore ( email )

Business School
15 Kent Ridge Drive
Singapore, 117592
Singapore
+65 6516 8017 (Phone)
+65 6779 2083 (Fax)

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary

George H. Lentz

California State Polytechnic University, Pomona ( email )

3801 W. Temple Avenue
Pomona, CA 91768
United States
909-869-4435 (Phone)
909-869-2124 (Fax)

Wei Yu

California State Polytechnic University, Pomona ( email )

3801 W. Temple Avenue Pomona
Pomona, CA 91768
United States
909-869-2402 (Phone)

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