State Antipredatory Lending Laws and Neighborhood Foreclosure Rates

ABSTRACT: In this study, we examine the impact of state antipredatory lending laws (APLs) on neighborhood foreclosure and delinquency rates using a set of panel data regression models. We find strong evidence that neighborhoods have lower default rates in states with laws that extended federal coverage and/or restricted more mortgage contract terms, in states with broader coverage of subprime loans with high points and fees, and in states with more restrictive regulations on prepayment penalties. A typical APL lowers neighborhood default rates by between 3.8% and 18%, depending on the default risk measure considered. The findings remain consistent when we restrict the analysis to cross-border neighborhoods, suggesting that they are not due solely to unobservable market variation.

[1]  Wei Li,et al.  Risky Borrowers or Risky Mortgages Disaggregating Effects Using Propensity Score Models , 2011 .

[2]  A. Pennington-Cross,et al.  The Termination of Subprime Hybrid and Fixed Rate Mortgages , 2017 .

[3]  A. Goodman,et al.  Hierarchical Modeling of Residential Default: Does State Level Foreclosure and Predatory Lending Legislation Limit 'Bad' Loans? , 2009 .

[4]  Raphael W. Bostic,et al.  Mortgage Product Substitution and State Anti-predatory Lending Laws: Better Loans and Better Borrowers? , 2009 .

[5]  F. Richter.  An Analysis of Foreclosure Rate Differentials in Soft Markets , 2008 .

[6]  Raphael W. Bostic,et al.  State and Local Anti-Predatory Lending Laws: The Effect of Legal Enforcement Mechanisms , 2007 .

[7]  K. Ernst,et al.  Do state predatory lending laws work? A panel analysis of market reforms , 2007 .

[8]  W. R. Davis,et al.  The impact of predatory loan terms on subprime foreclosures: The special case of prepayment penalties and balloon payments , 2007 .

[9]  Tara Rice,et al.  Federal Preemption of State Bank Regulation: A Conference Panel Summary , 2006 .

[10]  Giang Ho,et al.  Predatory Lending Laws and the Cost of Credit , 2006 .

[11]  Giang Ho,et al.  The Impact of Local Predatory Lending Laws on the Flow of Subprime Credit , 2006 .

[12]  A. Pennington‐Cross,et al.  The Delinquency of Subprime Mortgages , 2005 .

[13]  James Vanderhoff,et al.  The Conditional Probability of Foreclosure: An Empirical Analysis of Conventional Mortgage Loan Defaults , 2004 .

[14]  M. Staten,et al.  Regulation of Subprime Mortgage Products: An Analysis of North Carolina's Predatory Lending Law , 2004 .

[15]  Michael LaCour-Little,et al.  A Note on Hybrid Mortgages , 2004 .

[16]  Anthony Pennington-Cross,et al.  The Value of Foreclosed Property , 2004 .

[17]  P.eter J Nigro,et al.  Do Predatory Lending Laws Influence Mortgage Lending? An Analysis of the North Carolina Predatory Lending Law , 2004 .

[18]  W. R. Davis,et al.  Assessing the impact of North Carolina's predatory lending law , 2004 .

[19]  P.eter J Nigro,et al.  How Do Predatory Lending Laws Influence Mortgage Lending in Urban Areas? , 2003 .

[20]  David M. Drukker,et al.  Testing for Serial Correlation in Linear Panel-data Models , 2003 .

[21]  Roberto G. Quercia.  THE IMPACT OF NORTH CAROLINA'S ANTI-PREDATORY LENDING LAW: A DESCRIPTIVE ASSESSMENT , 2003 .

[22]  Yongheng Deng,et al.  A Dynamic Analysis of Fixed- and Adjustable-Rate Mortgage Terminations* , 2002 .

[23]  Grant S. Nelson.  Real Estate Finance Law , 1993 .