Housing Default: Theory Works and So Does Policy

45 Pages Posted: 16 Dec 2012

See all articles by Allen C. Goodman

Allen C. Goodman

Wayne State University - Department of Economics

Brent C. Smith

Virginia Commonwealth University

Date Written: May 1, 2010

Abstract

Using a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities.

Keywords: residential mortgage default, predatory lending, mortgage pricing

JEL Classification: E44, G21, G28, K11, R20

Suggested Citation

Goodman, Allen C. and Smith, Brent C., Housing Default: Theory Works and So Does Policy (May 1, 2010). FRB Richmond Working Paper No. 10-10, Available at SSRN: https://ssrn.com/abstract=2189656 or http://dx.doi.org/10.2139/ssrn.2189656

Allen C. Goodman (Contact Author)

Wayne State University - Department of Economics ( email )

656 W. Kirby
Detroit, MI 48202
United States
313-577-3344 (Phone)
313-577-0149 (Fax)

Brent C. Smith

Virginia Commonwealth University ( email )

1015 Floyd Avenue
Richmond, VA 23284
United States

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