Abstract
The presumption that mortgage markets for low-income borrowers and neighborhoods are underserved by lenders has led to a variety of increased government interventions on the supply side of the housing market. Although many studies of low-income lending at the neighborhood level have been published, none is from the firm’s perspective. We adopt such a framework to test the twin propositions that the low-income mortgage market is no different from the non-low-income mortgage market and that the low-income mortgage market is underserved.
We examine empirically whether the operating costs including credit losses, revenues, and profits of savings and loan institutions engaged in more low-income lending differ systematically from those that do less low-income lending. We find that firms engaged in more low-income mortgage lending have higher costs than those engaged in less low-income lending, which is consistent with higher credit risk for low-income loans. Nevertheless, these firms are no more profitable than those that do less low-income lending, which is inconsistent with a market for low-income mortgage lending that is currently underserved.
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© 1997 Kluwer Academic Publishers
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Malmquist, D., Phillips-Patrick, F., Rossi, C. (1997). The Economics of Low-Income Mortgage Lending. In: Benston, G.J., Hunter, W.C., Kaufman, G.G. (eds) Discrimination in Financial Services. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6147-7_10
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DOI: https://doi.org/10.1007/978-1-4615-6147-7_10
Publisher Name: Springer, Boston, MA
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