Skip to main content
Article thumbnail
Location of Repository

What role did piggyback lending play in the housing bubble and mortgage collapse?

By Michael LaCour-Little, Charles A. Calhoun and Wei Yu

Abstract

We examine the use of simultaneous close junior lien lending ("piggybacks") over the course of the recent housing bubble and subsequent mortgage market collapse. Using both state-level and Zip code-level data over the period 2001-2008, we find that the fraction of piggyback originations is related to higher foreclosure and default rates in subsequent years, and this relation is strongest for non-owner-occupied properties. The pattern, however, appears to be limited to the use of subprime piggybacks, rather than a more general phenomenon. Using a topology-based housing supply elasticity measure as an instrument for house price growth, we further confirm that the strong association of subprime piggyback origination with worse loan performance was not driven by the endogeneity of house price appreciation.Mortgage Foreclosure Housing Piggyback lending

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.sciencedirect.com/s... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.