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Borrowing to Live

Consumer and Mortgage Credit Revisited

edited by Nicolas P. Retsinas and Eric S. Belsky

Publication Year: 2009

Americans are awash in debt, and the U.S. economy is in trouble. Credit undergirds daily life more than ever —it has become one of the defining aspects of American life, and the ramifications are becoming clearer by the day. The already considerable damage from a depressed housing market has been exacerbated by the subprime lender implosion, sending shock waves through the financial sector, international economies, and government at all levels. Most low- or moderate-income people borrow, but that should not be construed as uniformly poor judgment or lack of disciplines —Americans are not borrowing merely to keep up with the Joneses, but too often simply to stay afloat.

In Borrowing to Live, the Joint Center for Housing Studies of Harvard University brings together a group of experts drawn from the best of academia, research, and public services. Together with editors Nicolas Retsinas and Eric Belsky, they dissect the worrisome current state of consumer and mortgage credit in the United States and help point the way out of the current struggles.

Contributors: Michael S. Barr, Eric S. Belsky, Raphael W. Bostic, Shawn Cole, Amy Crews Cutts, Kathleen C. Engel, Ren S. Essene, Elaine Kempson, Patricia A. McCoy, William A. Merrill, Sendhil Mullainathan, Anthony Pennington-Cross, Elizabeth Renuart, Eldar Shafir, Edna R. Sawady, Jennifer Tescher, John Thompson, Peter Tufano, Susan M. Wachter

Published by: Brookings Institution Press

Front Cover

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Title Page, Series Page, Copyright, Dedication

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Table of Contents

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pp. vii-viii

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pp. ix-x

This book is the product of a symposium examining the challenges of improving outcomes for consumers and driving market efficiencies in the consumer credit system, while preserving the choice and access that borrowers with limited financial means and with subpar credit records have enjoyed. ...

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Introduction: Borrowing to Live

Nicolas P. Retsinas, Eric S. Belsky

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pp. 1-4

Not so long ago, when poor people desperately needed a loan, they sought out neighborhood sharks—and paid and paid. Or they relied on retailers like car dealers and furniture stores to finance their purchases. Houses were beyond reach. Before the Community Reinvestment Act in 1977 was enacted, deposit-taking banks—the traditional mortgage lenders—often rejected them. ...

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1. Consumer Mortgage Credit at the Crossroads

Eric S. Belsky, Ren S. Essene, Nicolas P. Retsinas

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pp. 5-64

By all measures, Americans are awash in debt as never before.1 While median net wealth grew from $69,465 to $93,001 from 1989 to 2004, it was outpaced by consumer debt, which more than doubled during the same period, from $22,000 to $55,300.2 By 2004, 76.4 percent of all households reported some form of borrowing; ...

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2. Where Does It Go? Spending by the Financially Constrained

Shawn Cole, John Thompson, Peter Tufano

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pp. 65-91

Despite widespread interest by academics, businesspeople, and policymakers, little is known about the financial behavior of low-income individuals, particularly the unbanked and underbanked. We examine the spending patterns of low- and moderate-income (LMI) households using a new database and focus on differences in spending as a function of consumers’ credit constraints. ...

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3. Financial Decisionmaking Processes of Low-Income Individuals

Edna R. Sawady, Jennifer Tescher

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pp. 92-109

In The End of Poverty, Jeffrey Sachs describes the poor as “ready to act, both individually and collectively . . . hard working . . . [and having] a very realistic idea about their conditions and how to improve them, not a mystical acceptance of their fate.”1 This description differs markedly from the stereotypical portrayal of low-income individuals as reluctant workers and irrational consumers. ...

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4. The Legal Infrastructure of Subprime and Nontraditional Mortgages

Patricia A. McCoy, Elizabeth Renuart

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pp. 110-137

We are at a crossroads. The regulatory landscape of mortgages, through decades of deregulation, crass competition for charters, and aggressive concentration of federal power at the expense of state laws protecting local citizens, failed to curb abuses in the mortgage market in any meaningful way. ...

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5. The Impact of State Antipredatory Lending Laws: Policy Implications and Insights

Raphael W. Bostic, Kathleen C. Engel, Patricia A. McCoy, Anthony Pennington-Cross, Susan M. Wachter

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pp. 138-169

The subprime mortgage market, which consists of high-cost loans designed for borrowers with weak credit,1 has grown tremendously over the past ten years. Between 1993 and 2005, the subprime market experienced an average annual growth rate of 26 percent.2 ...

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6. Behaviorally Informed Home Mortgage Credit Regulation

Michael S. Barr, Sendhil Mullainathan, Eldar Shafir

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pp. 170-202

Choosing a mortgage is one of the biggest financial decisions an American consumer will make. Yet it can be a complicated one, especially in today’s environment, where mortgages vary along several dimensions and on unique features. This complexity has raised regulatory issues. ...

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7. Interventions in Mortgage Default: Policies and Practices to Prevent Home Loss and Lower Costs

Amy Crews Cutts, William A. Merrill

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pp. 203-254

The implosion of the subprime market in early 2007 and subsequent deterioration of the prime market in 2008 caused by the rapid rise in mortgage defaults resulted in significant media and political focus on saving homeowners from foreclosure and the possible loss of their home. ...

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8. Looking beyond Our Shores: Consumer Protection Regulation Lessons from the United Kingdom

Elaine Kempson

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pp. 255-268

Credit regulation in the United Kingdom has been undergoing substantial reform in the past three years. This chapter reviews these reforms and discusses how they take account of criticisms of previous regulatory regimes. It draws out some of the strengths and weaknesses of current regulation from a consumer’s perspective. ...


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pp. 269-270


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pp. 271-289

Back Cover

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E-ISBN-13: 9780815701729
E-ISBN-10: 0815701721

Page Count: 289
Publication Year: 2009