Search Results
Working Paper
On the Economics of Discrimination in Credit Markets
This paper develops a general equilibrium model of both taste-based and statistical discrimination in credit markets. We find that both types of discrimination have similar predictions for intergroup differences in loan terms. The commonly held view has been that if there exists taste-based discrimination, loans approved to minority borrowers would have higher expected profitability than to majorities with comparable credit background. We show that the validity of this profitability view depends crucially on how expected loan profitability is measured. We also show that there must exist ...
Working Paper
The Age Gap in Mortgage Access
This paper uses data on millions of single-borrower mortgage applications to study the relationship between applicant age and mortgage application outcomes. Conditional on a rich set of applicant, property, and loan characteristics, mortgage refinance applications submitted by older borrowers are associated with higher rejection probabilities. This pattern holds within lender and across loan types. Rejection probability increases smoothly with age and accelerates in old age. The acceleration is slower for female applicants. Inability to maintain properties may contribute as older applicants ...
Working Paper
The impact of the home valuation code of conduct on appraisal and mortgage outcomes
Superseded by Working Paper 15-28. During the housing crisis, it came to be recognized that inflated home mortgage appraisals were widespread during the subprime boom. The New York State Attorney General?s office investigated this issue with respect to one particular lender and Fannie Mae and Freddie Mac. The investigation resulted in an agreement between the Attorney General?s office, the government-sponsored enterprises (GSEs), and the Federal Housing Finance Agency (the GSEs? federal regulator) in 2008, in which the GSEs agreed to adopt the Home Valuation Code of Conduct (HVCC). Using ...
Conference Paper
The subprime turmoil: what’s old, what’s new, and what’s next
Working Paper
Second Home Buyers and the Housing Boom and Bust
Record-high second home buying (homeowners acquiring nonprimary residences) was a central feature of the 2000s boom, but the macroeconomic effects remain an open question partly because reliable geographic data is currently unavailable. This paper constructs local data on second home buying by merging credit bureau data with mortgage servicing records. The identification strategy exploits the fact that the vacation share of housing from the 2000 Census is predictive of second home origination shares during the boom years, while also uncorrelated with other boom-bust drivers including proxies ...
Discussion Paper
How Severe Was the Credit Cycle in the New York-Northern New Jersey Region?
U.S. households accumulated record-high levels of debt in the 2000s, and then began a process of deleveraging following the Great Recession and financial crisis. In some parts of the country, the rise and fall in household indebtedness was quite a bit sharper than in others. In this post, we highlight some of our research examining the magnitude of the recent credit cycle, and focus on how significant it?s been in New York State and northern New Jersey. Compared with the nation as a whole, we find that the region experienced a relatively mild credit cycle, although pockets of elevated ...
Working Paper
How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic
We study the evolution of US mortgage credit supply during the COVID-19 pandemic. Although the mortgage market experienced a historic boom in 2020, we show there was also a large and sustained increase in intermediation markups that limited the pass-through of low rates to borrowers. Markups typically rise during periods of peak demand, but this historical relationship explains only part of the large increase during the pandemic. We present evidence that pandemic-related labor market frictions and operational bottlenecks contributed to unusually inelastic credit supply, and that ...
Working Paper
Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance
We study the role of mortgage servicers in implementing the CARES Act mortgage forbearance program during the COVID-19 pandemic. Despite universal eligibility,we document that a significant number of federally backed mortgage borrowers be-come delinquent during the pandemic without successfully entering into a forbearance program, and that the relative frequency of these "missing" forbearances varies significantly across mortgage servicers for otherwise identical loans. Forbearance out-comes are systematically related to servicer characteristics including size, liquidity and ...
Working Paper
A cost-benefit analysis of judicial foreclosure delay and a preliminary look at new mortgage servicing rules
Since the start of the financial crisis, we have seen an extraordinary lengthening of foreclosure timelines, particularly in states that require judicial review to complete a foreclosure but also recently in nonjudicial states. Our analysis synthesizes findings from several lines of research, updates results, and presents new analysis to examine the costs and benefits of judicial foreclosure review. Consistent with previous studies, we find that judicial review imposes large costs with few, if any, offsetting benefits. We also provide early analysis of the new mortgage servicing rules enacted ...
Working Paper
Household Financial Distress and the Burden of 'Aggregate' Shocks
The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing ...