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The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross

Finance Faculty Research and Publications

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 …

The Value Of Foreclosed Property, Anthony Pennington-Cross

Finance Faculty Research and Publications

This paper examines the expected price appreciation of distressed property and compares it to the prevailing metropolitan area appreciation rate. Whether due to individual property or local area heterogeneity in appreciation, the results show that foreclosed property appreciates less than the area average appreciation rate. The magnitude of the deviation is sensitive to loan characteristics, legal restrictions, housing market conditions and marketing time.

The Evolution Of The Subprime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross

Finance Faculty Research and Publications

This paper describes subprime lending in the mortgage market and how it has evolved through time. Subprime lending has introduced a substantial amount of risk-based pricing into the mortgage market by creating a myriad of prices and product choices largely determined by borrower credit history (mortgage and rental payments. foreclosures and bankruptcies, and overall credit scores) and down payment requirements. Although sub prime lending still differs from prime lending in many ways, much of the growth (at least in the securitized portion of the market) has come in the least-risky (A-) segment of the market. In addition, lenders have imposed …

States Fight Predatory Lending Laws In Different Ways, Giang Ho, Anthony Pennington-Cross

Finance Faculty Research and Publications

To restrict predatory lending in the subprime (high cost) mortgage market, Congress enacted in 1994 the Home Ownership and Equity Protection Act (HOEPA). This law restricts some types of lending and requires lenders to disclose additional information about loans that have predatory features. Following the lead of federal regulations, at least 23 states, beginning with North Carolina in 1999, have introduced their own predatory lending laws, using HOEPA as a template.1

Perhaps not surprisingly, research focusing on the impact of the North Carolina law found that the rate of applications and originations for subprime loans declined after the law took …