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Working Paper
Liquidity Crises in the Mortgage Market
Non-banks originated about half of all mortgages in 2016, and 75% of mortgages insured by the FHA or VA. Both shares are much higher than those observed at any point in the 2000s. We describe in this paper how non-bank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario. We show how the same liquidity issues unfolded during the financial crisis, leading to the failure of many non-bank companies, requests for ...
Discussion Paper
Deconstructing Mechanic’s Liens
In this paper, we examine a new data set composed of mechanic’s lien complaints filed in the First Judicial District of Pennsylvania (Philadelphia County). Over a 10-year period, 426 mechanic’s liens were filed against 398 single-family properties, which is less than 0.1 percent of single-family properties in Philadelphia. The lien properties in our data set tend to be more expensive, newer, and larger than non-lien properties. About 80 percent of mechanic’s liens are filed by general contractors, with the remainder pursued by a subcontractor. Notably, a 2014 change in Pennsylvania law ...
Discussion Paper
Can Data Sharing Help Financial Institutions Improve the Financial Health of Older Americans?
This paper explores how increased data sharing among financial institutions could improve the financial outcomes of older adults suffering from cognitive impairment. Among the first signs of cognitive impairment in older adults is a decline in financial capacity, which is also a risk factor for abuse or exploitation. Banks and other financial institutions are at the front lines to monitor and detect changes in financial capacity and susceptibility to fraud and abuse. However, industry experts have found that, in many cases, no mechanism exists for financial service providers to communicate ...
Working Paper
Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom
An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002–2006 U.S. house price boom. By contrast, this paper documents a robust, negative correlation between the growth in the share of purchase mortgages to subprime borrowers and house price appreciation at the county-level during this time. Using two different instrumental variables approaches, we also establish causal evidence that house price appreciation lowered the share of purchase loans to subprime borrowers. Further analysis using micro-level credit bureau data shows that ...
Working Paper
Prior Fraud Exposure and Precautionary Credit Market Behavior
This paper studies how past experiences with privacy shocks affect individuals’ take-up of precautionary behavior when faced with a new privacy shock in the context of credit markets. We focus on experiences with identity theft and data breaches, two kinds of privacy shocks that either directly lead to fraud or put an individual at an elevated risk of experiencing fraud. Using the announcement of the 2017 Equifax data breach, we show that individuals with either kind of prior fraud exposure were more likely to freeze their credit report and close credit card accounts than individuals with ...
Working Paper
Debt Collection Agencies and the Supply of Consumer Credit
This paper finds that stricter laws regulating third-party debt collection reduce the number of third-party debt collectors, lower the recovery rates on delinquent credit card loans, and lead to a modest decrease in the openings of new revolving lines of credit. Further, stricter third-party debt collection laws are associated with fewer consumer lawsuits against third-party debt collectors but not with a reduction in the overall number of consumer complaints. Overall, stricter third-party debt collection laws appear to restrict access to new revolving credit but have an ambiguous effect on ...
Working Paper
Identity theft as a teachable moment
This paper examines how instances of identity theft that are sufficiently severe to induce consumers to place an extended fraud alert in their credit reports affect their risk scores, delinquencies, and other credit bureau variables on impact and thereafter. We show that for many consumers these effects are relatively small and transitory. However, for a significant number of consumers, especially those with lower risk scores prior to the event, there are more persistent and generally positive effects on credit bureau variables, including risk scores. We argue that these positive changes for ...
Working Paper
Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom
An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002?06 U.S. house price boom. Contrary to this belief, we show that the house price and subprime booms occurred in different places. Counties with the largest home price appreciation between 2002 and 2006 had the largest declines in the share of purchase mortgages to subprime borrowers. We also document that the expansion in speculative mortgage products and underwriting fraud was not concentrated among subprime borrowers.
Working Paper
Debt collection agencies and the supply of consumer credit
Supersedes Working Paper 13-38/R. The activities of third-party debt collectors affect millions of borrowers. However, relatively little is known about their impact on consumer credit. To study this issue, I investigate whether state debt collection laws affect the ability of third-party debt collectors to recover delinquent debts and if this, in turn, affects the amount of credit being provided. This paper constructs, from state statutes and session laws, a state-level index of debt collection restrictions and uses changes in this index over time to estimate the impact of debt collection ...
Journal Article
Consumers and credit disclosures: credit cards and credit insurance
Under the Truth in Lending Act, the Federal Reserve has the responsibility for writing the implementing rules, which it has carried out with its Regulation Z. Because this law is so critical for federal consumer protection policy in the credit area and because it imposes significant compliance costs on creditors, questions have been raised about consumers' use of the protections inherent in Truth in Lending. Even though measurement of the precise effect of particular disclosure requirements on credit-use behavior or competition is problematic, one can study consumers' reports of their views ...