The geography of subprime mortgage prepayment penalty patterns

John Farris and Christopher Richardson

Housing Policy Debate, 2004, vol. 15, issue 3, 687-714

Abstract: Concern over abusive lending practices in the subprime mortgage market has grown in recent years. This article examines empirically the geographic variation in the use of prepayment penalties, a potentially abusive feature found in most subprime mortgage loans. While controlling for borrower and loan characteristics at the loan level, we use a comprehensive national database to estimate the effects of geography and minority concentration on the probability that subprime borrowers will receive mortgages with prepayment penalties of various lengths. Logistic regression model estimates indicate that, after controlling for a set of underwriting factors, loan type, and minority concentration, rural borrowers with subprime mortgage loans are generally more likely to receive prepayment penalties than their urban counterparts are. In addition, minority concentration shows a consistent, significantly positive correlation with the probability of receiving prepayment penalties. Our results call into question the use of such penalties in the subprime mortgage market.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/10.1080/10511482.2004.9521517 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:houspd:v:15:y:2004:i:3:p:687-714

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RHPD20

DOI: 10.1080/10511482.2004.9521517

Access Statistics for this article

Housing Policy Debate is currently edited by Tom Sanchez, Susanne Viscarra and Derek Hyra

More articles in Housing Policy Debate from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().