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Thy Neighbor’s Mortgage: Does Living in a Subprime Neighborhood Impact Your Probability of Default?∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Agarwal, Sumit Ambrose, Brent W. |
| Copyright Year | 2009 |
| Abstract | This paper focuses on the potential externalities associated with subprime mortgage origination activity. Specifically, we examine whether negative spillover effects from subprime mortgage originations result in higher default rates in the surrounding area. Our empirical analysis controls for loan characteristics, house price changes, and alternative loan products. Our results indicate that after controlling for these characteristics, the concentration of subprime lending in a neighborhood does not lead to greater default risks for surrounding borrowers. However, we do find that more aggressive mortgage products (such as hybrid-ARMs and low/no documentation loans) had significant negative spillovers on other borrowers. Stated differently, the aggressive alternative mortgage designs were more toxic to the housing and mortgage market than previously believed. |
| File Format | PDF HTM / HTML |
| DOI | 10.2139/ssrn.1593734 |
| Alternate Webpage(s) | https://cpb-us-e1.wpmucdn.com/blogs.gwu.edu/dist/a/326/files/2016/12/5th-2izuuv5.pdf |
| Alternate Webpage(s) | http://www.ires.nus.edu.sg/researchpapers/Visitors/Prof%20Tony%20Sanders.pdf |
| Alternate Webpage(s) | https://doi.org/10.2139/ssrn.1593734 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
