Publisher's Synopsis
A dramatic rise in subprime foreclosures over the past several years has led to calls for restrictions of, or prohibitions against, a range of lending practices loosely termed "predatory." Several cities and states have enacted legislation or regulations aimed at eliminating predatory practices, and some advocacy groups have endorsed action nationally. This working paper uses data from the Chicago metropolitan area to examine the impact of two frequently cited predatory lending practices, long prepayment penalty periods and balloon payments, on the probability of foreclosure on subprime refinance and home purchase mortgages. This paper also examines the impact of low- and no-documentation, and how combinations of low- and no-documentation, long prepayment penalty periods, and balloon payments affect foreclosure rates.
