Saturday, 22 October 2011: 5:15 PM
This paper examines the income characteristics of borrowers in the United States mortgage market between 2004 and 2007, and how the economic trouble across US cities, measured by changes in personal income, unemployment, and home prices, varied depending on the density of lending to each cohort. This paper examines data, mainly from the Home Mortgage Disclosure Act (HMDA) and Survey of Consumer Finances (SCF), by looking at descriptive statistics in order to better assess the relative quantities of lending and home buying across the United States. It also conducts an Ordinary Least Squares (OLS) multiple regression test to assess the impact of lending to different income cohorts over the period 2004 - 2007 using cross-sectional data from the 90 largest US metropolitan areas. The data support the hypothesis that lending to upper and middle income borrowers had a very significant effect on economic distress across cities during the crisis, giving support to the idea that the period of 2004 - 2007 was more a period of societal speculation than it was a period of excessive lending to low income classes.