The impact of local predatory lending laws on the flow of subprime credit

Giang Ho and Anthony Pennington-Cross

No 2006-009, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application and origination) of credit. However, the strength of the law, measured by the extent of market coverage and the extent of prohibitions, can have strong impacts on both the flow of credit and rejections.

Keywords: Mortgages; Banking law; Home equity loans (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-fmk, nep-reg and nep-ure
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Citations: View citations in EconPapers (33)

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Journal Article: The impact of local predatory lending laws on the flow of subprime credit (2006)
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