Business Commons^™

Subprime Lending In The Primary And Secondary Mortgage Market, Anthony Pennington-Cross

Anthony Pennington-Cross

This article provides an exploratory analysis of the role of subprime lending through an examination of the spatial distribution of Federal Housing Administration (FHA)—eligible home purchase loans in the primary and secondary mortgage markets. Loan originations are aggregated to the metropolitan statistical area level to examine the proportion of the market served by FHA, prime, and subprime lenders. The article then examines whether subprime lenders hold their loans in portfolio or sell them to private conduits. Primary market results indicate that subprime lenders are more active in cities with worse economic risk characteristics. Secondary market results indicate that although subprime …