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Did Dubious Mortgage Origination Practices Distort House Prices?

55 Pages Posted: 23 Aug 2014 Last revised: 17 Jan 2016

John M. Griffin

University of Texas at Austin - Department of Finance

Gonzalo Maturana

Emory University - Goizueta Business School

Date Written: January 2016

Abstract

ZIP codes with high concentrations of originators who misreported mortgage information experienced a 75% larger relative increase in house prices from 2003 to 2006 and a 90% larger relative decrease from 2007 to 2012 compared to other ZIP codes. Several causality tests show that high fractions of dubious originators in a ZIP code lead to large price distortions. Originators with high misreporting gave credit to borrowers with high ex-ante risk, yet further understated the borrowers' true risk. Overall, excess credit facilitated through dubious origination practices explain much of the regional variation in house prices over a decade.

Keywords: housing bubble, misreporting, mortgage originators, bad practices

JEL Classification: G21, G23, R30, R31

Suggested Citation

Griffin, John M. and Maturana, Gonzalo, Did Dubious Mortgage Origination Practices Distort House Prices? (January 2016). 27th Australasian Finance and Banking Conference 2014 Paper. Available at SSRN: https://ssrn.com/abstract=2485308 or http://dx.doi.org/10.2139/ssrn.2485308

John M. Griffin (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Gonzalo Maturana

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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

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