How Do Predatory Lending Laws Influence Mortgage Lending in Urban Areas? A Tale of Two Cities

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Abstract
This paper examines the effects of predatory lending laws in the cities of Chicago and Philadelphia. The level of mortgage activity in each of the cities is compared during the pre- and post-legislative periods relative to other parts of the state to assess the impact of localized legislation. In Chicago, where the predatory lending law focused on banks, a subprime origination in the city was found to be more likely to be made by a non-bank after the passage of the law. In Philadelphia, however, where the predatory legislation was aimed at all financial service providers, a decline was observed in the likelihood of a subprime loan being originated in the city during the post-legislation period, with the minority and low-income market segments experiencing the largest reduction.