IDEAS home Printed from https://ideas.repec.org/a/atw/epecon/v1y2010i4p88-107.html
   My bibliography  Save this article

Did bankruptcy reform lead to looser mortgage lending standards? Evidence from the U.S. mortgage market 2000-2007

Author

Listed:
  • Prajakta Bhide

    (New York University)

  • Lucia Fiorito

    (New York University)

  • Zachary Noteman

    (New York University)

  • Kunal Sawardekar

    (New York University)

Abstract

This paper seeks to find an exogenous cause for deterioration in mortgage lending standards since 2005 that contributed to the subprime mortgage crisis in the U.S. We find that the new means test provision in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 was such an exogenous shock in the mortgage market. We show that the means test, which makes Chapter 7 bankruptcy unavailable to relatively better off borrowers, caused a shift in the supply of mortgage credit from better off borrowers to relatively poorer borrowers. Simultaneously, we found borrowers being charged higher interest rates, for all classes of income. Our findings imply that BAPCPA may be a contributing factor toward the deterioration of lending standards in the U.S. mortgage market.

Suggested Citation

  • Prajakta Bhide & Lucia Fiorito & Zachary Noteman & Kunal Sawardekar, 2010. "Did bankruptcy reform lead to looser mortgage lending standards? Evidence from the U.S. mortgage market 2000-2007," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 1(4), pages 88-107, Octubre.
    • Handle: RePEc:atw:epecon:v:1:y:2010:i:4:p:88-107
    as

    Download full text from publisher

    File URL: https://erevistas.uca.edu.ar/index.php/ENSAYOS/article/view/3710/3662
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 23(2), pages 83-100.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Brianzoni Serena & Mammana Cristiana & Michetti Elisabetta, 2007. "Complex Dynamics in the Neoclassical Growth Model with Differential Savings and Non-Constant Labor Force Growth," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(3), pages 1-19, September.
    4. Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
    5. Bohm, Volker & Kaas, Leo, 2000. "Differential savings, factor shares, and endogenous growth cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 965-980, June.
    6. repec:bla:econom:v:40:y:1973:i:159:p:311-13 is not listed on IDEAS
    7. Jess Benhabib & Kazuo Nishimura, 2012. "Competitive Equilibrium Cycles," Springer Books, in: John Stachurski & Alain Venditti & Makoto Yano (ed.), Nonlinear Dynamics in Equilibrium Models, edition 127, chapter 0, pages 75-96, Springer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fernando Suárez, 2021. "Dinámica discreta en un modelo de crecimiento de Solow con ahorro diferencial constante y crecimiento poblacional no constante," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 3(3), pages 25-39, Octubre.
    2. Marcelo F. Resico, 2007. "Las Reformas Económicas y la Modernización del Estado," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 1(1), pages 104-122, Octubre.
    3. Brianzoni, Serena & Mammana, Cristiana & Michetti, Elisabetta, 2009. "Nonlinear dynamics in a business-cycle model with logistic population growth," Chaos, Solitons & Fractals, Elsevier, vol. 40(2), pages 717-730.
    4. Agliari, Anna & Böhm, Volker & Pecora, Nicolò, 2020. "Endogenous cycles from income diversity, capital ownership, and differential savings," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    5. Dohtani, Akitaka, 2010. "A growth-cycle model of Solow-Swan type, I," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 428-444, November.
    6. John Stachurski, 2009. "Economic Dynamics: Theory and Computation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012774, April.
    7. Serena Brianzoni, & Cristiana Mammana, & Elisabetta Michetti,, 2006. "Global attractor in Solow growth model with differential savings and endogenic labor force growth," Working Papers 35-2006, Macerata University, Department of Finance and Economic Sciences, revised Oct 2008.
    8. Orlando Gomes, 2007. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, January.
    9. Tramontana, Fabio & Sushko, Iryna & Avrutin, Viktor, 2015. "Period adding structure in a 2D discontinuous model of economic growth," Applied Mathematics and Computation, Elsevier, vol. 253(C), pages 262-273.
    10. Michetti, Elisabetta, 2015. "Complex attractors and basins in a growth model with nonconcave production function and logistic population growth rate," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 108(C), pages 215-232.
    11. Pengfei Wang & Yi Wen, 2007. "Endogenous volatility, endogenous growth, and large welfare gains from stabilization policies," Working Papers 2006-032, Federal Reserve Bank of St. Louis.
    12. Francesca Grassetti & Cristiana Mammana & Elisabetta Michetti, 2018. "Poverty trap, boom and bust periods and growth. A nonlinear model for non-developed and developing countries," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 41(2), pages 145-162, November.
    13. David Cheban & Cristiana Mammana & Elisabetta Michetti, 2012. "Non-Autonomous Difference Equations: Global Attractor in a Business-Cycle Model with Endogenous Population Growth," Working Papers 69-2012, Macerata University, Department of Finance and Economic Sciences, revised Sep 2015.
    14. Bohm, Volker & Kaas, Leo, 2000. "Differential savings, factor shares, and endogenous growth cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 965-980, June.
    15. Brianzoni, Serena & Mammana, Cristiana & Michetti, Elisabetta, 2012. "Variable elasticity of substituition in a discrete time Solow–Swan growth model with differential saving," Chaos, Solitons & Fractals, Elsevier, vol. 45(1), pages 98-108.
    16. Orlando Gomes, 2006. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 437-468, November.
    17. Frédéric Lordon, 1991. "Théorie de la croissance : quelques développements récents [Première partie : la croissance récente]," Revue de l'OFCE, Programme National Persée, vol. 36(1), pages 157-211.
    18. David Cheban & Cristiana Mammana & Elisabetta Michetti, 2008. "Global Attractors of Non-autonomous Difference Equations," Working Papers 47-2008, Macerata University, Department of Finance and Economic Sciences, revised Oct 2008.
    19. Grassetti, Francesca & Mammana, Cristiana & Michetti, Elisabetta, 2018. "Substitutability between production factors and growth. An analysis using VES production functions," Chaos, Solitons & Fractals, Elsevier, vol. 113(C), pages 53-62.
    20. Orlando Gomes, 2006. "Routes to chaos in macroeconomic theory," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 33(6), pages 437-468, November.

    More about this item

    Keywords

    Bankruptcy; means test; mortgage default; lending standards;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:atw:epecon:v:1:y:2010:i:4:p:88-107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/depucar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.