The Impact of State Anti-Predatory Lending Laws: Policy Implications and Insights

Bostic, Raphael W.; Engel, Kathleen C.; McCoy, Patricia A.; Pennington‐Cross, Anthony; Wächter, Susan M.

doi:10.2139/ssrn.1115192

Cited by 5 publications

(2 citation statements)

References 10 publications

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“…Considering the large share of subprime mortgages originated by national banks, federal thrifts, and their subsidiaries—all preempted from state APLs—there has been some debate whether such preemption is to blame, at least in part, for the foreclosure crisis (Belsky, Essene, & Retsinas, ; Bostic et al, ). As policymakers revisit the regulatory landscape in the wake of the foreclosure crisis, people need to better understand the role that federal preemption plays in consumer protection.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Federal Preemption of State Antipredatory Lending Laws on the Foreclosure Crisis

Ding

Quercia²,

Reid

et al. 2012

J Policy Anal Manage

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State antipredatory lending laws (APLs) are designed to protect borrowers against predatory lending that can increase the risk of default and deplete the home equity held by borrowers. Federal regulators instituted preemption that limited the scope and reach of state antipredatory lending regulations for certain lenders. Based on the variation in state laws and the variation in the regulatory environment among lenders, this paper identifies the effects of federal preemption of state APLs on the quality of mortgages originated by preempted lenders. The results provide evidence of a relatively higher increase in default risk among loans exempted from strong state antipredatory laws. These results are most robust among refinance mortgages with adjustable interest rates-a large and highly dynamic market in the period of analysis. The findings provide initial evidence that preemption of state mortgage lending regulations may result in an increase in mortgage default risk, thus limiting consumer protection in the residential mortgage market. C 2012 by the Association for Public Policy Analysis and Management.

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Section: Introductionmentioning

confidence: 99%

The Impact of Federal Preemption of State Antipredatory Lending Laws on the Foreclosure Crisis

Ding

Quercia²,

Reid

et al. 2012

J Policy Anal Manage

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“…Congress passed the federal Home Ownership and Equity Protection Act (HOEPA) in 1994, imposing substantive restrictions on lending terms and practices for mortgages with high prices. Unfortunately, the HOEPA law's coverage was limited, and almost no mortgages were originated that were covered by HOEPA's high‐cost threshold (Avery, Brevoort, & Canner, 2007; Bostic, Engel, McCoy, Pennington‐Cross, & Wachter, 2008b). In an effort to address the perceived weaknesses in consumer protection laws at the federal level, many states have enacted antipredatory lending laws (APLs) since the late 1990s.…”

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confidence: 99%

State Antipredatory Lending Laws and Neighborhood Foreclosure Rates

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Reid

et al. 2011

Journal of Urban Affairs

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In this study, we examine the impact of state antipredatory lending laws (APLs) on neighborhood foreclosure and delinquency rates using a set of panel data regression models. We find strong evidence that neighborhoods have lower default rates in states with laws that extended federal coverage and/or restricted more mortgage contract terms, in states with broader coverage of subprime loans with high points and fees, and in states with more restrictive regulations on prepayment penalties. A typical APL lowers neighborhood default rates by between 3.8% and 18%, depending on the default risk measure considered. The findings remain consistent when we restrict the analysis to cross-border neighborhoods, suggesting that they are not due solely to unobservable market variation.

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New Racial Meanings of Housing in America

Wyly¹,

Ponder²,

Nettling³

et al. 2012

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America is now half a decade into the worst economic crisis since the Great Depression, triggered by a deeply racialized “innovation” at the social and spatial margin—risky, high-cost mortgage lending—that went mainstream. Predatory capital perfected its operations in poor and working-class black neighborhoods of the deindustrializing inner city, before pursuing the greater volume available across a multiracial array of postindustrial Sun Belt suburbanites. In this article, we map the dangerous spatial configurations of law that reproduced these evolving exploitations. The catastrophic aftermath of predatory financialization may have destabilized the alliance between economic and cultural conservatives that structures so much of America’s racial political economy.

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The Impact of State Anti-Predatory Lending Laws: Policy Implications and Insights

Cited by 5 publications

References 10 publications

The Impact of Federal Preemption of State Antipredatory Lending Laws on the Foreclosure Crisis

The Impact of Federal Preemption of State Antipredatory Lending Laws on the Foreclosure Crisis

State Antipredatory Lending Laws and Neighborhood Foreclosure Rates

New Racial Meanings of Housing in America

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