Document Type

Article

Language

eng

Format of Original

22 p.

Publication Date

1-2007

Publisher

Federal Reserve Bank of Saint Louis

Source Publication

Federal Reserve Bank of St. Louis Review

Source ISSN

0014-9187

Abstract

Federal, state, and local predatory lending laws are designed to restrict and in some cases prohibit certain types of high-cost mortgage credit in the subprime market. Empirical evidence using the spatial variation in these laws shows that the aggregate flow of high-cost mortgage credit can increase, decrease, or be unchanged after these laws are enacted. Although it may seem counterintuitive to find that a law that prohibits lending could be associated with more lending, it is hypothesized that a law may reduce the cost of sorting honest loans from dishonest loans and lessen borrowers’ fears of predation, thus stimulating the high-cost mortgage market.

Comments

Published version. Federal Reserve Bank of St. Louis Review, Vol. 89, No. 1 (January/February 2007): 39-60. Permalink. © 2017 Federal Reserve Bank of Saint Louis. Used with permission.

Originally published in Federal Reserve Bank of St. Louis Review. © 2007 by the Federal Reserve Bank of St. Louis. All views expressed herein are those of the author(s) and not necessarily those of the Federal Reserve Bank of St. Louis or the Federal Reserve System.

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