Document Type
Article
Publication Date
9-2006
Source Publication
Journal of Urban Economics
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.
Comments
Originally published in Journal of Urban Economics, Volume 60, No. 2 (September 2006), DOI: 10.1016/j.jue.2006.02.005.
Anthony Pennington-Cross was affiliated with the Federal Reserve Bank of St. Louis at the time of publication.