46 Pages Posted: 8 Feb 2015 Last revised: 17 Jun 2016
Date Written: June 16, 2016
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: 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