Working Paper: NBER ID: w28781
Authors: Stephen L. Ross; Yuan Wang
Abstract: We use HMDA rate spread loans to identify lenders involved in riskier lending prior to the foreclosure crisis. We develop a shift-share measure of changes in high rate spread share lender representation in housing submarkets across origination years. While half the cross-sectional correlation between foreclosure and high rate spread lender share is explained by borrower observables, we find robust and stable estimates of the within housing submarket relationship between foreclosure and predicted changes in market share. Estimates are not explained by local housing price variation, rather evidence suggests servicer behavior in response to rising local foreclosure rates as a mechanism.
Keywords: Mortgage lenders; Foreclosures; Geographic concentration; Subprime lending; Risky lending
JEL Codes: D14; G01; G21; R21; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high cost lender representation (G21) | foreclosure rates (G21) |
| high cost lender representation (G21) | disparities in foreclosure rates across demographic groups (R23) |
| expansion of higher risk lending (G21) | foreclosure rates (G21) |
| geographic concentration of high cost lenders (R38) | foreclosure likelihood (G33) |
| servicer behavior (L84) | geographic concentration of foreclosures (R31) |