Risk‐based mortgage pricing: Present and future research

Alan White

Housing Policy Debate, 2004, vol. 15, issue 3, 503-531

Abstract: The debate surrounding predatory lending laws and the subprime mortgage market revolves around two hypotheses. The efficient‐pricing hypothesis says that the market is providing broader access to credit, offering higher rates and fees to higher‐risk borrowers, and that prices relate directly to risk. The opportunity‐pricing hypothesis says that the high interest rates and fees charged in the subprime market are well in excess of risk‐related costs. A number of facts about the subprime mortgage market support the second hypothesis. Existing research includes price information, papers inferring a correlation between high prices and high risk of credit loss from observed default rates, theoretical discussions to explain pricing dispersion, and studies trying to determine whether laws that indirectly restrict prices have reduced the supply of mortgage credit. Information asymmetries, seller obfus‐cation, and search costs contribute to the inefficiencies in this market and suggest several policy responses.

Date: 2004
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10511482.2004.9521512 (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:503-531

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

DOI: 10.1080/10511482.2004.9521512

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 ().