Emergence of Subprime Lending in Minority Neighborhoods

Egle Jakucionyte and Swapnil Singh
Additional contact information
Swapnil Singh: Bank of Lithuania, Kaunas University of Technology

No 94, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: Subprime lending is concentrated among minorities and in minority neighborhoods. However, the literature has little evidence for what led to the rise of subprime lending in minority neighborhoods. We use the endorsement of FICO credit scores in mortgage underwriting by the Government Sponsored Enterprises (GSEs) in 1995 to answer this question. The use of credit scores led to the sorting of prime and subprime lenders across minority and non-minority neighborhoods. In minority neighborhoods prime lenders were substituted by subprime lenders and, as a result, the share of subprime lending in minority neighborhoods increased by 5 percentage points. Prime lenders with a stronger relationship with the GSEs reduced their lending in minority neighborhoods more. The level of securitization by the GSEs in minority neighborhoods also decreased.

Keywords: Mortgages; Subprime lenders; GSEs; Securitization; Minorities (search for similar items in EconPapers)
JEL-codes: G21 G28 J15 R23 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2021-11-08
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.lb.lt/uploads/publications/docs/33527_ ... 6e34a81acb4a50f0.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Emergence of subprime lending in minority neighborhoods (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lie:wpaper:94

Access Statistics for this paper

More papers in Bank of Lithuania Working Paper Series from Bank of Lithuania Bank of Lithuania Gedimino pr. 6, LT-01103 Vilnius, Lithuania. Contact information at EDIRC.
Bibliographic data for series maintained by Aurelija Proskute ().