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Research Seminars & Workshops @ IRES

Professor Zsuzsa R Husza
National University of Singapore

Does Regulatory Disclosure Affect Lending Practices?
A Study of Subprime Lending to Minority Neighborhoods


11 December 2008




IRES Seminar Room, SDE1 #04-24


The 2002 amendment to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA), requires most lenders to disclose information about the relative cost at which they provide mortgage credit. We use this regulatory change as a natural experiment to study the effect of increased disclosure of loan pricing information on subprime loan origination in minority neighborhoods by two broad types of lenders, depository and nondepository institutions. We find that depository institutions approved relatively fewer subprime loans to minority neighborhoods after the new pricing disclosure requirement than what they were expected to approve without the pricing information disclosure requirement. However, our analysis does not show a similar effect for nondepository institutions. We also find that those depository institutions that received good reviews from regulators in terms of effectively serving the neighborhoods financing needs are less likely to issue higher-priced subprime loans.

For full paper, download here

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