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Working Paper
The depth of negative equity and mortgage default decisions
A central question in the literature on mortgage default is at what point underwater homeowners walk away from their homes even if they can afford to pay. We study borrowers from Arizona, California, Florida, and Nevada who purchased homes in 2006 using non-prime mortgages with 100 percent financing. Almost 80 percent of these borrowers default by the end of the observation period in September 2009. After distinguishing between defaults induced by job losses and other income shocks from those induced purely by negative equity, we find that the median borrower does not strategically default ...
Journal Article
The 2014 Home Mortgage Disclosure Act Data
This article provides an overview of the 2014 data reported under the Home Mortgage Disclosure Act of 1975 and analyzes mortgage market activity over time as well as lending patterns across different demographic groups and lender types. The number of home-purchase originations was about 4 percent higher in 2014 than in 2013, while the number of refinance loans was 55 percent lower. We document an increasing share of mortgage loans originated by independent, nondepository mortgage companies. In addition, we analyze the possible effects of recent changes to rules regulating the mortgage market.
Discussion Paper
The Decline in Lending to Lower-Income Borrowers by the Biggest Banks
Data collected under the Home Mortgage Disclosure Act (HMDA) reveal that the largest banks have significantly reduced their share of mortgage lending to low- and moderate-income (LMI) households in recent years.
Working Paper
Payday loans and consumer financial health
The annualized interest rate for a payday loan often exceeds 10 times that of a typical credit card, yet this market grew immensely in the 1990s and 2000s, elevating concerns about the risk payday loans pose to consumers and whether payday lenders target minority neighborhoods. This paper employs individual credit record data, and Census data on payday lender store locations, to assess these concerns. Taking advantage of several state law changes since 2006 and, following previous work, within-state-year differences in access arising from proximity to states that allow payday loans, I find ...
Working Paper
Giving credit where credit is due? the Community Reinvestment Act and mortgage lending in lower-income neighborhoods
I identify and quantify the mortgage supply effect of the Community Reinvestment Act (CRA), a law mandating that banks help provide credit in lower-income neighborhoods, by exploiting a discontinuity in the selection rule determining which census tracts CRA targets. Using a comprehensive source of micro data on MSA mortgage applications, I find that CRA affects bank lending primarily in large MSA's, where banks are most scrutinized. The analysis indicates that CRA's effect on bank originations was about 4% between 1994 and 1996, and expanded to 8% in 1997-2002, consistent with the timing of a ...
Working Paper
The ins and outs of mortgage debt during the housing boom and bust
From 1999 to 2013, U.S. mortgage debt doubled and then contracted sharply. Our understanding of the factors driving this volatility in the stock of debt is hampered by a lack of data on mortgage flows. Using comprehensive, individual-level panel data on consumer liabilities, I estimate detailed mortgage inflows and outflows. During the boom, inflows from real estate investors tripled, far outpacing growth from other segments such as first-time homebuyers. During the bust, although defaults and deleveraging are popular explanations for the debt decline, a collapse in inflows has been the major ...
Discussion Paper
Assessing the Community Reinvestment Act's Role in the Financial Crisis
An important question arising out of the financial crisis is whether the Community Reinvestment Act (CRA) played a significant role in the subprime mortgage boom and bust by pushing banks to make loans to risky borrowers.