The Neighborhood Distribution of Subprime Mortgage Lending

32 Pages Posted: 12 Dec 2003

See all articles by Paul S. Calem

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Kevin Gillen

University of Pennsylvania, Wharton

Susan M. Wachter

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

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2003

Abstract

Subprime lending has grown over the past decade into a highly visible part of the United States' mortgage market. Previous studies have shown that a relatively large share of subprime lending occurs in census tracts with high concentrations of low-income and minority households, generating the concern that minority households may not be provided equal opportunity in the prime mortgage market. This study expands the literature by utilizing data from the Census, HMDA, and proprietary data on neighborhood risk factors, to perform a spatial analysis of subprime lending across Census tracts, supplemented with a logit regression analysis at the borrower level. Results indicate that lending patterns across neighborhoods are strongly influenced by neighborhood risk composition. Across census tracts, increased credit risk is associated with a larger subprime share of loans in the tract or increased odds of subprime borrowing relative to prime. We also find a substantial concentration of subprime lending in neighborhoods where homeowners are predominantly African American, and we find that African-American borrower is strongly correlated with being a subprime borrower in the logit regressions, with or without the control variables.

Keywords: Subprime lending, mortgage market, low-income households, minority households, mortgage lending patterns

Suggested Citation

Calem, Paul S. and Gillen, Kevin and Wachter, Susan M., The Neighborhood Distribution of Subprime Mortgage Lending (April 15, 2003). U of Penn, Inst for Law & Econ Research Paper 03-39. Available at SSRN: https://ssrn.com/abstract=478581 or http://dx.doi.org/10.2139/ssrn.478581

Paul S. Calem

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

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Kevin Gillen

University of Pennsylvania, Wharton ( email )

Philadelphia, PA 19104-6330
United States
215-898-4818 (Phone)
215-573-5261 (Fax)

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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