Predatory Lending and the Subprime Crisis

Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet and Douglas Evanoff

No 19550, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We measure the effect of an anti-predatory pilot program (Chicago, 2006) on mortgage default rates to test whether predatory lending was a key element in fueling the subprime crisis. Under the program, risky borrowers and/or risky mortgage contracts triggered review sessions by housing counselors who shared their findings with the state regulator. The pilot cut market activity in half, largely through the exit of lenders specializing in risky loans and through decline in the share of subprime borrowers. Our results suggest that predatory lending practices contributed to high mortgage default rates among subprime borrowers, raising them by about a third.

JEL-codes: D14 D18 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-ban and nep-ure
Note: LE
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Citations: View citations in EconPapers (3)

Published as Agarwal, Sumit & Amromin, Gene & Ben-David, Itzhak & Chomsisengphet, Souphala & Evanoff, Douglas D., 2014. "Predatory lending and the subprime crisis," Journal of Financial Economics, Elsevier, vol. 113(1), pages 29-52.

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Journal Article: Predatory lending and the subprime crisis (2014)
Working Paper: Predatory Lending and the Subprime Crisis (2012)
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