Fraudulent Income Overstatement on Mortgage Applications During the Credit Expansion of 2002 to 2005

46 Pages Posted: 8 Feb 2015 Last revised: 17 Jun 2016

Atif R. Mian

Princeton University - Department of Economics; Princeton University - Woodrow Wilson School of Public and International Affairs; NBER

Amir Sufi

University of Chicago - Booth School of Business; NBER

Multiple version iconThere are 3 versions of this paper

Date Written: June 16, 2016

Abstract

Treating fraudulently overstated income on mortgage applications as true income leads to incorrect conclusions on the nature of the mortgage credit supply expansion toward marginal borrowers from 2002 to 2005. A positive gap between zip-code level income growth calculated from mortgage applications and income growth from the IRS likely reflects mortgage fraud, not an improvement in home-buyer income. In support of the credit supply view, mortgage credit for home purchase expanded significantly more in low credit score neighborhoods on both the extensive and intensive margin from 2002 to 2005, even though these neighborhoods deteriorated on many measures of income prospects.

Keywords: subprime, mortgage, fraud, housing, bubble, default, foreclosure

JEL Classification: E60, E50

Suggested Citation

Mian, Atif R. and Sufi, Amir, Fraudulent Income Overstatement on Mortgage Applications During the Credit Expansion of 2002 to 2005 (June 16, 2016). Kreisman Working Papers Series in Housing Law and Policy No. 21. Available at SSRN: https://ssrn.com/abstract=2561366 or http://dx.doi.org/10.2139/ssrn.2561366

Atif R. Mian

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amir Sufi (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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