Lending Competition, Regulation and Non-Traditional Mortgages

48 Pages Posted: 26 Dec 2017 Last revised: 26 Oct 2021

See all articles by Arthur Acolin

Arthur Acolin

University of Washington - College of Built Environments

Xudong An

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ; University of Pennsylvania - Finance Department

Date Written: October 25, 2021

Abstract

We examine the factors that determine the likelihood of borrowers using non-traditional mortgages (NTMs) prior to the Great Recession. Borrower choice depends on borrower characteristics such as income, levels of asset holdings, credit score and age and on market factors such as house price appreciation as shown in the literature. We add to the literature by showing that lending competition was significantly associated with the early growth of NTMs while growth of non-bank lending was associated with later-stage expansion of NTMs. We also find that state level anti-predatory lending laws were more effective in restraining the origination of NTMs in markets with higher levels of lending competition.

Keywords: lending competition, non-traditional mortgage, credit supply, anti-predatory lending regulation

JEL Classification: D12, R21, R31

Suggested Citation

Acolin, Arthur and An, Xudong and Wachter, Susan M., Lending Competition, Regulation and Non-Traditional Mortgages (October 25, 2021). Available at SSRN: https://ssrn.com/abstract=3090554

Arthur Acolin

University of Washington - College of Built Environments ( email )

224 Gould Hall
Box 355726
Seattle, WA 98195
United States

Xudong An

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Susan M. Wachter (Contact Author)

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

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