Predatory Lending Laws and the Cost of Credit
FRB of St. Louis Working Paper No. 2006-022A
44 Pages Posted: 21 Apr 2006
Date Written: April 2006
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: Suggested Citation