Explaining the Growth of Higher-Priced Loans in HMDA: A Decomposition Approach

Chau Do () and Irina Paley ()
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Chau Do: Department of Treasury, Office of the Comptroller of the Currency, Washington, DC 20219

Journal of Real Estate Research, 2007, vol. 29, issue 4, 441-478

Abstract: The period 2004?005 showed a significant increase in Home Mortgage Disclosure Act (HMDA) rate spread reporting. Following the Oaxaca (1973), Blinder (1973), and Fairlie (2005) decomposition techniques, this study identifies the fraction of the increase due to the flattening of the yield curve. Even after controlling for changes in borrower risk characteristics, the findings reveal that during 2004?006, the flattening of the yield curve explains a significant amount of the increase in rate spread reportable loans. This is the case for both prime and subprime originations.

Date: 2007
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