A Tale of Three Markets Revisited

Susan Wachter's and Elizabeth Renuart's comments on A Tale of Three Markets: The Law and Economics of Predatory Lending highlight two phenomena that are critical to understanding predatory lending: the paucity of legitimate risk-based pricing in the subprime market and the steering of peop...

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Bibliographic Details
Published in:Texas law review 2003-12, Vol.82 (2), p.439
Main Authors: Engel, Kathleen C, McCoy, Patricia A
Format: Article
Language:English
Subjects:
Competition
Credit scoring
Foreclosure
Interest rates
Laboratories
Law
Liability
Loans
Minority & ethnic groups
Mortgages
Predatory lending
Pricing policies
Regulation
Regulatory reform
Risk premiums
State laws
Subprime lending
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Summary:Susan Wachter's and Elizabeth Renuart's comments on A Tale of Three Markets: The Law and Economics of Predatory Lending highlight two phenomena that are critical to understanding predatory lending: the paucity of legitimate risk-based pricing in the subprime market and the steering of people of color to predatory loans. In her comments, Wachter posits that without sufficient understanding of markets and the impact of predatory lending sanctions, it may be premature to render explicit suitability rules. But there is sufficient evidence today to begin grafting suitability rules. In a truly competitive market, risk premiums would not exceed the risks presented. The fact that they do - and by a substantial margin - is a compelling sign of competitive distortions in the subprime market.
ISSN:0040-4411
1942-857X