Mortgage Lenders and the Geographic Concentration of Foreclosures

Stephen L. Ross (stephen.l.ross@uconn.edu) and Yuan Wang (yuan_wang@freddiemac.com)
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Stephen L. Ross: University of Connecticut
Yuan Wang: FreddieMac

No 2022-001, Working Papers from Human Capital and Economic Opportunity Working Group

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: rate spread loans; subprime lending; local housing markets; home purchase mortgages; house price declines; loan servicers (search for similar items in EconPapers)
JEL-codes: D14 G01 G21 R21 R23 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban and nep-ure
Note: MIP
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Ross_W ... hic-foreclosures.pdf Firsts version, January 2022 (application/pdf)

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