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Mortgage Lenders and the Geographic Concentration of Foreclosures

Author

Listed:
  • Stephen L. Ross

    (University of Connecticut)

  • Yuan Wang

    (FreddieMac)

Abstract

We use HMDA rate spread loans to identify lenders involved in riskier lending prior to the foreclosure crisis. We develop a shift-share measure of changes in high rate spread share lender representation in housing submarkets across origination years. While half the cross-sectional correlation between foreclosure and high rate spread lender share is explained by borrower observables, we find robust and stable estimates of the within housing submarket relationship between foreclosure and predicted changes in market share. Estimates are not explained by local housing price variation, rather evidence suggests servicer behavior in response to rising local foreclosure rates as a mechanism.

Suggested Citation

  • Stephen L. Ross & Yuan Wang, 2022. "Mortgage Lenders and the Geographic Concentration of Foreclosures," Working Papers 2022-001, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2022-001
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    More about this item

    Keywords

    rate spread loans; subprime lending; local housing markets; home purchase mortgages; house price declines; loan servicers;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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