Do Predatory Lending Laws Influence Mortgage Lending? An Analysis of the North Carolina Predatory Lending Law

Posted: 17 Feb 2004

See all articles by Keith D. Harvey

Keith D. Harvey

Boise State University - College of Business and Economics

Peter J. Nigro

Bryant University - Department of Finance

Abstract

In this paper, we examine the effect of the 1999 North Carolina predatory lending law on mortgage activity in that state as compared to other states in the Southeastern United States. Using 1998-2000 Home Mortgage Disclosure Act (HMDA) data, we find that the North Carolina law reduced the overall level of subprime mortgage lending activity. Furthermore, we find that the North Carolina decline was caused by a decline in loan application volume and not by a change in loan denial rates, suggesting less aggressive marketing in that state after the imposition of the law. Finally, the impact of the legislation was different by both the type of financial service provider and borrower. Specifically, non-bank subprime lending contracted faster in North Carolina when compared to the control group, while both minority and low-income applicants were also less likely to get loans following the legislation. These results have wide ranging policy implications given that several predatory lending proposals are currently before Congress, as well as proposed in almost forty other states.

JEL Classification: G21, G28

Suggested Citation

Harvey, Keith D. and Nigro, Peter J., Do Predatory Lending Laws Influence Mortgage Lending? An Analysis of the North Carolina Predatory Lending Law. Available at SSRN: https://ssrn.com/abstract=497247

Keith D. Harvey (Contact Author)

Boise State University - College of Business and Economics ( email )

1910 University Drive
Boise, ID 83725
United States

Peter J. Nigro

Bryant University - Department of Finance ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

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