The varying effects of predatory lending laws on high-cost mortgage applications
Abstract: Federal, state, and local predatory lending laws are designed to restrict and in some cases prohibit certain types of high-cost mortgage credit in the subprime market. Empirical evidence using the spatial variation in these laws shows that the aggregate flow of high-cost mortgage credit can increase, decrease, or be unchanged after these laws are enacted. Although it may seem counterintuitive to find that a law that prohibits lending could be associated with more lending, it is hypothesized that a law may reduce the cost of sorting honest loans from dishonest loans and lessen borrowers' fears of predation, thus stimulating the high-cost mortgage market.
File(s): File format is application/pdf https://files.stlouisfed.org/files/htdocs/publications/review/07/01/HoPennCross.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 2007