Mortgage Choice: An Empirical Analysis Using Data From 2002

Michael LaCour-Little

BABC 04-6: This paper examines home purchase mortgage choice employing data from 2002.  Conventional, FHA, subprime, and special programs for low-to-moderate income borrowers are analyzed. Empirical results show that credit characteristics and other financial circumstances drive product choice, with some idiosyncratic factors such as the availability of reduced documentation programs and shorter time to closing helping to explain subprime product use. In contrast, demographic factors have little effect. Given difficulties defining subprime, we caution that data forthcoming as a result of HMDA changes will provide little help in understanding this relatively new market segment.