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The Impact of Local Predatory Lending Laws on the Flow of Subprime Credit
Journal of Urban Economics
  • Giang Ho, Federal Reserve Bank of St. Louis
  • Anthony Pennington-Cross, Marquette University
Document Type
Format of Original
19 p.
Publication Date
Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open-end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application and origination) of credit. However, the strength of the law, measured by the extent of market coverage and the extent of prohibitions, can have strong impacts on both the flow of credit and rejections.

Accepted version. Journal of Urban Economics, Vol. 60, No. 2 (September 2006): 210-228. DOI. © 2006 Elsevier. Used with permission.

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Urban Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Urban Economics, VOL 60, ISSUE 2, September 2006, DOI.

Anthony Pennington-Cross was affiliated with the Federal Reserve Bank of St. Louis at the time of publication.

Citation Information
Giang Ho and Anthony Pennington-Cross. "The Impact of Local Predatory Lending Laws on the Flow of Subprime Credit" Journal of Urban Economics (2006) ISSN: 0094-1190
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