Bringing Subprime Mortgages to Market and the Effects on Lower-Income Borrowers

BABC 04-7: Little systematic work exists to address the many and varied ways some borrowers end up with subprime mortgages and to what extent those loans serve the true financial needs of those borrowers. This paper is an attempt to fill this gap by exploring patterns of subprime lending activity in the City of Philadelphia. We concentrate on the mechanisms through which low- and moderate-income individuals obtain their loans with a particular emphasis on “outcomes” of those loans. Data used in this paper come from a variety of sources including quantitative information extracted from comprehensive data on a sample of properties in the City of Philadelphia detailing their mortgage and sale histories. Additionally, data on mortgage foreclosures and Sheriff Sales were obtained from offices within City government legally responsible for processing these actions. Qualitative information adding to this effort comes from a considerable number of interviews conducted with subject matter experts – from the borrowers themselves to securitizers on Wall Street…