Marginal Revolution: Predatory borrowing

Marginal Revolution Small steps toward a much better world.

Predatory borrowing Jan 30th 2013, 07:53 From Luigi Zingales: In fact, the authors find that more than 6% of mortgage loans misreport the borrower's occupancy status, while 7% do not disclose second liens. …The authors provide some interesting evidence in this context. They show, for example, that the misrepresentation is correlated with higher defaults down the line: delinquent payments on misreported loans are more than 60% higher than on loans that are otherwise similar. Thus, the errors do not seem to be random, but purposeful. What the authors do not find is also interesting. The degree of misrepresentation seems to be unrelated to the incentives provided to the top management and to the quality of risk-management practices inside these firms. In fact, all reputable intermediaries in their sample exhibit a significant degree of misrepresentation. Thus, the problem does not seem to be limited to a few bad apples, but is pervasive. Here is more, and here are comments from Arnold Kling.

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions