Abstract

Volume 29, Number 4, 2007, Special Issue of the Journal of Real Estate Research

Explaining the Growth of Higher-Priced Loans in HMDA: A Decomposition
Approach

Chau Do
Department of Treasury
Office of the Comptroller of the Currency
Washington, DC 20219
Email: chau.do@occ.treas.gov

Irina Paley
Department of Treasury
Office of the Comptroller of the Currency
Washington, DC 20219
Email: irina.paley@occ.treas.gov

Abstract:

The period 2004–2005 showed a significant increase in Home Mortgage Disclosure Act (HMDA) rate spread reporting. Following the Oaxaca (1973), Blinder (1973), and Fairlie (2005) decomposition techniques, this study identifies the fraction of the increase due to the flattening of the yield curve. Even after controlling for changes in borrower risk characteristics, the findings reveal that during 2004–2006, the flattening of the yield curve explains a significant amount of the increase in rate spread reportable loans. This is the case for both prime and subprime originations.