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Working Paper
The Effects of the 1930s HOLC \"Redlining\" Maps
In the wake of the Great Depression, the Federal government created new institutions such as the Home Owners' Loan Corporation (HOLC) to stabilize housing markets. As part of that effort, the HOLC created residential security maps for over 200 cities to grade the riskiness of lending to neighborhoods. We trace out the effects of these maps over the course of the 20th and into the early 21st century by linking geocoded HOLC maps to both Census and modern credit bureau data. Our analysis looks at the difference in outcomes between residents living on a lower graded side versus a higher graded ...
Newsletter
Flooding and Finances: Hurricane Harvey’s Impact on Consumer Credit
This article examines consumers? borrowing behavior and debt levels in the wake of Hurricane Harvey. We find that high levels of flooding from Harvey were associated with modest increases in auto loan balances, but moderate decreases in mortgage balances. In general, the storm did not hurt consumers? credit access according to the limited measures we investigate. These results are influenced by a number of factors, including federal disaster assistance, insurance payouts, and creditors permitting temporary postponements in loan payments, with such delays not being reported to credit bureaus.
Working Paper
Affordability, Financial Innovation, and the Start of the Housing Boom
At their peak in 2005, roughly 60 percent of all purchase mortgage loans originated in the United States contained at least one non-traditional feature. These features, which allowed borrowers easier access to credit through teaser interest rates, interest-only or negative amortization periods, and extended payment terms, have been the subject of much regulatory and popular criticism. In this paper, we construct a novel county-level dataset to analyze the relationship between rising house prices and non-traditional features of mortgage contracts. We apply a break-point methodology and find ...
Newsletter
Mortgage Refinancing during the Great Recession: The Role of Credit Scores
This article examines whether deteriorating credit scores may have posed a barrier to mortgage refinancing during the Great Recession of 2008?09 and its immediate aftermath. The authors find that in general, as long as borrowers kept up with their mortgage payments, their credit scores did not fall significantly over this period. Hence, credit scores are not likely to explain why certain borrowers with sufficient home equity did not refinance their mortgages.
Journal Article
Homebuilders, Affiliated Financing Arms and the Mortgage Crisis
The authors? findings indicate that homebuilder financing affiliates do make loans to observably riskier borrowers, but the loans made by homebuilders have lower delinquency rates than those made by unaffiliated lenders, even when loan and borrower characteristics are held constant.
Working Paper
Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time
This paper examines racial disparities in mortgage processing time prior to the global financial crisis. We find that Black borrowers are underrepresented and experience a longer processing time than White borrowers among the mortgages securitized by government-sponsored enterprises. At the same time, Black borrowers are overrepresented and face a similar processing time among privately securitized mortgages. Additionally, Black borrowers are strongly associated with the faster segments of mortgage markets, faster lenders within each segment, and the types of loan products that are processed ...
Working Paper
Contract Choice in the Interwar US Residential Mortgage Market
This paper studies mortgage contract choices in US history using a first-of-its-kind sample of residential loans from 1930 and 1940, linked to the decennial censuses. Contract choices reflected borrowers' reactions to the risks posed by different contracts. The majority of borrowers chose contracts with the longest available terms, despite required frequent amortization, likely in order to avoid refinancing risk and to maximize leverage. In contrast, the most creditworthy borrowers with high socioeconomic status preferred short-term contracts, confident that they could refinance at will. The ...
Working Paper
The Mortgage Rate Conundrum
We document the emergence of a disconnect between mortgage and Treasury interest rates in the summer of 2003. Following the end of the Federal Reserve expansionary cycle in June 2003, mortgage rates failed to rise according to their historical relationship with Treasury yields, leading to significantly and persistently easier mortgage credit conditions. We uncover this phenomenon by analyzing a large dataset with millions of loan-level observations, which allows us to control for the impact of varying loan, borrower and geographic characteristics. These detailed data also reveal that ...