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Articles 1 - 30 of 31
Full-Text Articles in Business
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross
Anthony Pennington-Cross
The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.
The Evolution Of The Subprime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
The Evolution Of The Subprime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Anthony Pennington-Cross
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 …
Commercial Property Rent Dynamics In U.S. Metropolitan Areas: An Examination Of Office, Industrial, Flex And Retail Space, Maria Ibanez, Anthony Pennington-Cross
Commercial Property Rent Dynamics In U.S. Metropolitan Areas: An Examination Of Office, Industrial, Flex And Retail Space, Maria Ibanez, Anthony Pennington-Cross
Anthony Pennington-Cross
This paper is concerned with the market rental rate for space offered by commercial property and how that rental rate evolves over time. Rental rates reflect the value of the services provided by the property and can have a significant impact on the ability of its owners to make monthly debt obligations. We investigate commercial property rent dynamics for 34 large metropolitan areas in the U.S. The dynamics are studied from the second quarter of 1990 through the second quarter of 2009 and the results are compared across four property types or uses (office, industrial, flex, and retail). There is …
The Termination Of Subprime Hybrid And Fixed Rate Mortgages, Anthony Pennington-Cross, Giang Ho
The Termination Of Subprime Hybrid And Fixed Rate Mortgages, Anthony Pennington-Cross, Giang Ho
Anthony Pennington-Cross
Adjustable-rate and hybrid loans have been a larger component of subprime mortgage lending in the mortgage market than prime lending. The typical adjustable-rate loan in subprime is a hybrid of fixed and adjustable characteristics in which the first 2 years are fixed and the remaining 28 years adjustable. Hybrid loans terminate at elevated probabilities even before the first adjustment date. Hybrid loan terminations are sensitive to interest rates and teaser rates (payment shocks). Default probabilities increase dramatically when payment shocks are mixed with low or no equity in the home. This is the mixture of events that helped to trigger …
Local Predatory Lending Laws: Going Beyond North Carolina, Anthony Pennington-Cross, Giang Ho
Local Predatory Lending Laws: Going Beyond North Carolina, Anthony Pennington-Cross, Giang Ho
Anthony Pennington-Cross
Following the lead of federal regulations, numerous states, counties and cities have enacted laws designed to reduce predatory lending. There is at least anecdotal evidence that predatory or abusive mortgage lending is primarily concentrated in the subprime market. However, the impact of these local predatory lending laws on the subprime mortgage market is unknown. The primary questions we examine are: do these laws affect the supply and flow of subprime mortgage credit and does the experience in North Carolina, the first state to enact a local predatory lending law, apply to other local laws?
The Impact Of State Anti-Predatory Lending Laws: Policy Implications And Insights, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
The Impact Of State Anti-Predatory Lending Laws: Policy Implications And Insights, Raphael W. Bostic, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter
Anthony Pennington-Cross
The subprime mortgage market, which consists of high-cost loans designed for borrowers with weak credit, has grown tremendously over the past ten years. Between 1993 and 2005, the subprime market experienced an average annual growth rate of 26 percent. As this market emerged, so did allegations that subprime loans contained predatory features or were the result of predatory sales practices.3 In the worst cases, brokers deceived borrowers about the meaning of loan terms or falsely promised to assist them in obtaining future refinance loans with better terms. In other situations, borrowers entered into loans with low teaser rates, not aware …
State And Local Anti-Predatory Lending Laws: The Effect Of Legal Enforcement Mechanisms, Raphael Bostic, Kathleen Engel, Patricia Mccoy, Anthony Pennington-Cross, Susan Wachter
State And Local Anti-Predatory Lending Laws: The Effect Of Legal Enforcement Mechanisms, Raphael Bostic, Kathleen Engel, Patricia Mccoy, Anthony Pennington-Cross, Susan Wachter
Anthony Pennington-Cross
Subprime mortgage lending has grown rapidly in recent years and with it, so have concerns about predatory lending. In response to evidence of predatory lending, most states have enacted new laws or expanded existing laws to address abuses in the subprime home loan market. The effect of these statutes is a matter of debate. This paper seeks to improve the understanding of this increasingly important issue and pays particular attention to the role that legal enforcement mechanisms play in this context. The results of the analysis are consistent with the view that anti-predatory lending laws influence subprime lending markets and …
Interest Rates In The Sub-Prime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Interest Rates In The Sub-Prime Mortgage Market, Souphala Chomsisengphet, Anthony Pennington-Cross
Anthony Pennington-Cross
No abstract provided.
Predatory Lending Laws And The Cost Of Credit, Anthony Pennington-Cross, Giang Ho
Predatory Lending Laws And The Cost Of Credit, Anthony Pennington-Cross, Giang Ho
Anthony Pennington-Cross
Various states and other local jurisdictions have enacted laws intending to reduce predatory and abusive lending in the subprime mortgage market. These laws have created substantial geographic variation in the regulation of mortgage credit. This article examines whether these laws are associated with a higher or lower cost of credit. Empirical results indicate that the laws are associated with at most a modest increase in cost. However, the impact depends on the product type. In particular, loans with fixed (adjustable) rates are associated with a modest increase (decrease) in cost.
Measuring The Impact Of Agglomeration On Productivity: Evidence From Chilean Retailers, Sergio Garate, Anthony Pennington-Cross
Measuring The Impact Of Agglomeration On Productivity: Evidence From Chilean Retailers, Sergio Garate, Anthony Pennington-Cross
Anthony Pennington-Cross
This research extends the agglomeration literature to a country that has not been studied and a market sector that has received little attention. The majority of research that examines how density affects productivity has indirectly measured productivity through worker wages or property prices. The research uses individual supermarkets’ store productivity, proxied by 10 years of annual sales per square foot. Studying supermarkets permits the examination of the effect consumers might have on productivity. Agglomerations (density) could increase or decrease productivity depending on the relative extent of increased competition versus productivity gains, as consumers choose where to shop based on their …
Local Economic Risk Factors On The Primary And Secondary Mortgage Markets, Brent Ambrose, Anthony Pennington-Cross
Local Economic Risk Factors On The Primary And Secondary Mortgage Markets, Brent Ambrose, Anthony Pennington-Cross
Anthony Pennington-Cross
This paper presents a cross-sectional analysis of the spatial distribution of loans in the primary and secondary mortgage markets. Aggregating loan originations to the MSA level, we examine the proportion of the market served by FHA and conventional lenders. We model the geographic differences in market shares as a function of supply, demand, and economic risk factors. Results indicate that FHA market shares are higher in cities with higher economic risk characteristics. To examine the role of GSE activity, we model the spatial distribution of the disposition of conventional loans. Again, we focus on the impact of local economic risk …
The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross
The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross
Anthony Pennington-Cross
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 …
Fayetteville And Hot Springs Lead The Recovery In Employment, Giang Ho, Anthony Pennington-Cross
Fayetteville And Hot Springs Lead The Recovery In Employment, Giang Ho, Anthony Pennington-Cross
Anthony Pennington-Cross
No abstract provided.
Credit History And The Fha-Conventional Choice, Anthony Pennington-Cross, Joseph Nichols
Credit History And The Fha-Conventional Choice, Anthony Pennington-Cross, Joseph Nichols
Anthony Pennington-Cross
Models explaining whether households choose conventional or FHA mortgage financing typically use differential insurance premiums, loan-to-value (LTV) and payment-to-income underwriting standards, and local economic conditions to explain household behavior. Using a large and geographically diverse sample, we expand the standard choice model by including measures of borrower credit history. We find that the ability of a homebuyer to avoid credit problems is an important part of the FHA–conventional choice. In addition, credit scores of FHA borrowers are worse on average than those of conventional borrowers, but as LTV increases credit scores of conventional borrowers deteriorate.
The Role Of Geographic Proximity And Industrial Structure In Metropolitan Area Business Cycles, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
The Role Of Geographic Proximity And Industrial Structure In Metropolitan Area Business Cycles, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
Measurement and prediction of aggregate economic fluctuations at the region, state, and metropolitan area level is a major challenge. As data quality and analytical techniques have improved, the analysis of coincident economic cycle indicators (CEI) has progressed from national to regional to state levels. This paper continues the trend of geographic disaggregation by constructing and analyzing CEI at the MSA level. The theoretical advantage of MSA level indexes is that they reflect labor market areas. Given lack of quarterly economic time series at the MSA level, we construct a new variable, the EPI (export price index). The EPI is an …
Credit Rationing In The U.S. Mortgage Market: Evidence From Variation In Fha Market Shares, Brent W. Ambrose, Anthony Pennington-Cross, Anthony M. Yezer
Credit Rationing In The U.S. Mortgage Market: Evidence From Variation In Fha Market Shares, Brent W. Ambrose, Anthony Pennington-Cross, Anthony M. Yezer
Anthony Pennington-Cross
This paper examines the nature of mortgage credit rationing across geographic markets and time. Particular attention is paid to the response of conventional mortgage supply to higher risk conditions associated with regional recessions. We develop a series of four indirect tests based on the spatial variation of the FHA share of mortgages, both endorsements and applications, as well as FHA and conventional rejection rates. Results of these four tests indicate that conventional mortgage underwriting criteria do not become more flexible and may even become more demanding when local economic conditions deteriorate. This result indicates the use of non-price credit rationing …
Borrower Self-Selection, Underwriting Costs, And Subprime Mortgage Credit Supply, Joseph Nichols, Anthony Pennington-Cross, Anthony Yezer
Borrower Self-Selection, Underwriting Costs, And Subprime Mortgage Credit Supply, Joseph Nichols, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
In the U.S., households participate in two very different types of credit markets. Personal lending is characterized by continuous risk-based pricing in which lenders offer households a continuous distribution of borrowing possibilities based on estimates of their creditworthiness. This contrasts sharply with mortgage markets where lenders specialize in specific risk categories of borrowers and mortgage supply is stepwise linear. The contrast between continuous lending for personal loans and discrete lending by specialized lenders for mortgage credit has led to concerns regarding the efficiency and equity of mortgage lending. This paper sheds both theoretical and empirical light on the differences in …
Measuring The Drivers Of Metropolitan Growth: The Export Price Index, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Measuring The Drivers Of Metropolitan Growth: The Export Price Index, Michael Hollar, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
The Export Price Index (EPI) is a measure of exogenous price shocks to a city’s export industries. Thus far the EPI has been used to estimate models of metropolitan statistical area employment demand and appears to capture exogenous demand shocks to the regional economy. This article explains the intuition behind and construction of the EPI. Glaeser (2008) has noted that because “the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices, and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous …
Subprime Refinancing: Equity Extraction And Mortgage Termination, Anthony Pennington-Cross, Souphala Chomsisengphet
Subprime Refinancing: Equity Extraction And Mortgage Termination, Anthony Pennington-Cross, Souphala Chomsisengphet
Anthony Pennington-Cross
This article examines the choice of borrowers to extract wealth from housing in the high-cost (subprime) segment of the mortgage market and assesses the prepayment and default performance of these cash-out refinance loans relative to the rate of refinance loans. Consistent with survey evidence, the propensity to extract equity is sensitive to the relative interest rates of other forms of consumer debt. After the loan is originated, results indicate that cash-out refinances perform differently from non-cash-out refinances. For example, cash-outs are less likely to default or prepay, and the termination of cash-outs is more sensitive to changing interest rates and …
The Evolution Of Real Estate In The Economy, Dapeng Hu, Anthony Pennington-Cross
The Evolution Of Real Estate In The Economy, Dapeng Hu, Anthony Pennington-Cross
Anthony Pennington-Cross
While the economy as a whole has been rapidly changing in response to technological innovation, real estate has evolved from a depository of wealth for households and assets for corporations into a major force in the debt and equity markets. In contrast, the role of real estate as a contributor to the nation's output and income has remained steady at approximately 11% of gross domestic product.
The Value Of Foreclosed Property, Anthony Pennington-Cross
The Value Of Foreclosed Property, Anthony Pennington-Cross
Anthony Pennington-Cross
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.
States Fight Predatory Lending Laws In Different Ways, Giang Ho, Anthony Pennington-Cross
States Fight Predatory Lending Laws In Different Ways, Giang Ho, Anthony Pennington-Cross
Anthony Pennington-Cross
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 …
Alternative Methods Of Increasing The Precision Of Weighted Repeat Sales House Prices Indices*, Michelle H. Dreiman, Anthony Pennington-Cross
Alternative Methods Of Increasing The Precision Of Weighted Repeat Sales House Prices Indices*, Michelle H. Dreiman, Anthony Pennington-Cross
Anthony Pennington-Cross
Weighted repeat sales house price indices have become one of the primary indicators used to identify housing market conditions and to estimate the amount of equity homeowners have gained through house price appreciation. The primary reason for the acceptance of this methodology is that it derives a location specific (typically, census division, state or metropolitan area) average change in house prices from repeated observations of individual house prices. It is this repeat attribute that allows repeat sales price indices to claim that it is a preferable index which does a better job of holding quality constant. The amount of time …
The Federal Housing Administration In The New Millennium, Anthony Pennington-Cross, Anthony Yezer
The Federal Housing Administration In The New Millennium, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
The first challenge in attempting to predict the future of the Federal Housing Administration (FHA) is to understand why it is still here. No other depression-era mortgage-market institution has survived without substantial modification. We conclude that its survival has depended on its ability to invent new purposes for itself. For example, it changed from a replacement for failed private mortgage insurance using economic soundness as an insurance criterion to an innovator in high-risk lending based on an acceptable risk criterion. FHA has developed special programs to serve the needs of specific groups. We believe this pattern of change in purposes …
Mortgage Product Substitution And State Anti-Predatory Lending Laws: Better Loans And Better Borrowers?, Raphael Bostic, Souphala Chomsisengphet, Kathleen Engel, Patricia Mccoy, Anthony Pennington-Cross, Susan Wachter
Mortgage Product Substitution And State Anti-Predatory Lending Laws: Better Loans And Better Borrowers?, Raphael Bostic, Souphala Chomsisengphet, Kathleen Engel, Patricia Mccoy, Anthony Pennington-Cross, Susan Wachter
Anthony Pennington-Cross
Mounting foreclosures and recent disclosures of abusive lending practices have led many states to adopt new anti-predatory lending laws. Researchers have examined the impact of such laws on credit flows and the cost of credit. This research extends the literature by examining if the market responded to these laws by substituting different mortgage products for those restricted by antipredatory lending provisions. The evidence indicates that the new laws were effective in restricting loans with targeted characteristics and that the market substituted other product types to maintain affordability in the face of these restrictions.
The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross
The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross
Anthony Pennington-Cross
This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinomial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. The results show that the duration of foreclosures is impacted by many factors including contemporaneous housing market conditions, the prior performance of the loan (prior delinquency), and the state-level legal environment.
The Varying Effects Of Predatory Lending Laws On High-Cost Mortgage Applications, Giang Ho, Anthony Pennington-Cross
The Varying Effects Of Predatory Lending Laws On High-Cost Mortgage Applications, Giang Ho, Anthony Pennington-Cross
Anthony Pennington-Cross
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 …
A Dynamic Look At Subprime Loan Performance, Michelle A. Danis, Anthony Pennington-Cross
A Dynamic Look At Subprime Loan Performance, Michelle A. Danis, Anthony Pennington-Cross
Anthony Pennington-Cross
Does delinquency have any predictive power for the future performance of a mortgage? Analysis of a sample of subprime mortgages from the Loanperformance database on securitized private-label pool collateral using a two-step estimation procedure to control for the endogeneity of delinquency reveals strong support for the distressed prepayment theory that very delinquent loans are more likely to prepay than to default and that prepayment rates increase substantially as delinquency intensity increases. While delinquency leads predominantly to termination of a loan through prepayment, negative equity leads to termination through default. Does delinquency have any predictive power for the future performance of …
Credit History And The Performance Of Prime And Nonprime Mortgages, Anthony Pennington-Cross
Credit History And The Performance Of Prime And Nonprime Mortgages, Anthony Pennington-Cross
Anthony Pennington-Cross
Although nonprime lending has experienced steady or even explosive growth over the last decade very little is known about the performance characteristics of these mortgages. Using data from national secondary market institutions, this paper estimates a competing risks proportional hazard model, which includes unobserved heterogeneity. The analysis examines the performance of 30-year fixed rate owner occupied home purchase mortgages from February 1995 to the end of 1999 and compares nonprime and prime loan default and prepayment behavior. Nonprime loans are identified by mortgage interest rates that are substantially higher than the prevailing prime rate. Results indicate that nonprime mortgages differ …
Measuring External Shocks To The City Economy: An Index Of Export Prices And Terms Of Trade, Anthony Pennington-Cross
Measuring External Shocks To The City Economy: An Index Of Export Prices And Terms Of Trade, Anthony Pennington-Cross
Anthony Pennington-Cross
This paper details the construction of an index of export goods prices (the Export Price Index or EPI) for a panel of 196 metropolitan areas from 1977 to 1992. The EPI is an indicator of external demand shocks to the city economy which does not suffer from the causal ambiguity of the endogenous indicators such as income, employment or output. The creation of an index of aggregate export prices, the EPI, for the panel of areas provides both academicians and policy analysts with a new exogenous indicator that identifies demand price innovations and the terms of trade shocks …