Subprime Lending: Neighborhood Patterns Over Time in Us Cities

32 Pages Posted: 31 Jul 2006

See all articles by Susan M. Wachter

Susan M. Wachter

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

Karl Russo

University of Pennsylvania - The Wharton School; Government of the United States of America - Joint Committee on Taxation

Jonathan E. Hershaff

Board of Governors of the Federal Reserve System

Abstract

Subprime lending serves those with relatively high credit risk and therefore entails higher borrowing costs. This market has grown tremendously over the past decade, although with substantial variation in growth rates across the central cities of metropolitan areas in the US. Previous research has focused on specific cities and has shown that subprime lending historically occurs disproportionately in areas with higher risk, lower income and larger shares of minority households. This paper extends the literature by conducting a nation-wide study of how subprime lending patterns have changed over time across all US central cities. We find subprime lending growth is higher in urban census tracts with higher percentages of Hispanic population, lower levels of educational attainment, and, ceteris paribus, higher median family incomes.

Keywords: subprime lending patterns, high credit risk, high borrowing costs, low income, minority, nationwide study, Hispanic, education, income

Suggested Citation

Wachter, Susan M. and Russo, Karl and Hershaff, Jonathan E., Subprime Lending: Neighborhood Patterns Over Time in Us Cities. U of Penn, Inst for Law & Econ Research Paper No. 06-19. Available at SSRN: https://ssrn.com/abstract=920847 or http://dx.doi.org/10.2139/ssrn.920847

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

Karl Russo

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Government of the United States of America - Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Jonathan E. Hershaff

Board of Governors of the Federal Reserve System ( email )

20th & C Streets, NW
Washington, DC 20551
United States

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