The Varying Effects of Predatory Lending Laws on High-Cost Mortgage ApplicationsFederal Reserve Bank of St. Louis Review
Format of Original22 p.
PublisherFederal Reserve Bank of Saint Louis
AbstractFederal, 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.
Citation InformationGiang Ho and Anthony Pennington-Cross. "The Varying Effects of Predatory Lending Laws on High-Cost Mortgage Applications" Federal Reserve Bank of St. Louis Review (2007) ISSN: 0014-9187
Available at: http://works.bepress.com/anthony_pennington_cross/9/