Are relative solutions to abusive mortgage lending practices throwing out the baby with the bathwater?
Author InfoGregory Elliehausen Michael E. Staten George J. Wallace Abstract Subprime mortgage lending is controversial. Its critics see excessive prices, unfair terms and “predatory” practices. Proponents see a much narrower set of problems. Legislative and regulatory solutions to perceive problems are being implemented piecemeal across states and even local jurisdictions. Unfortunately, little careful empirical work has been done to identify either extent of the alleged abuses or the costs of proposed reforms. ; This article presents new evidence about how the subprime mortgage market works. It suggests that legislative “reform” efforts in some cases are reducing availability and raise the price of legitimate loans to subprime borrowers without stopping the abuse and fraud the critics decry. It also suggests that a focus on increased deceptive practices enforcement rather than significant new controls on loan terms and pricing will do less harm than the proposed reforms, while also mo
