Predatory Lending Laws and the Cost of Credit

FRB of St. Louis Working Paper No. 2006-022A

44 Pages Posted: 21 Apr 2006

See all articles by Giang Ho

Giang Ho

University of California, Los Angeles (UCLA)

Anthony Pennington-Cross

Marquette University - Dept. of Finance

Date Written: April 2006

Abstract

Various states and other local jurisdictions have enacted laws intending to reduce predatory and abusive lending in the subprime mortgage market. These laws have created substantial geographic variation in the regulation of mortgage credit. This paper examines whether these laws are associated with a higher or lower cost of credit. Empirical results indicate that the laws are associated with at most a modest increase in cost. However, the impact depends on the product type. In particular, loans with fixed (adjustable) rates are associated a modest increase (decrease) in cost.

Keywords: mortgages, predatory, laws, subprime, interest rates

JEL Classification: G21, C25

Suggested Citation

Ho, Giang and Pennington-Cross, Anthony N., Predatory Lending Laws and the Cost of Credit (April 2006). FRB of St. Louis Working Paper No. 2006-022A, Available at SSRN: https://ssrn.com/abstract=897275 or http://dx.doi.org/10.2139/ssrn.897275

Giang Ho (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Anthony N. Pennington-Cross

Marquette University - Dept. of Finance ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

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