The Publicness of Policy Environments: An Evaluation of Subprime Mortgage Lending

Previous evaluations of publicness have focused largely on organizations and organizational behavior. This analysis extends the applicability of publicness one step further, to consider the effect of the publicness of policy environments on resulting individual-level outcomes. Subprime or high-cost mortgage lending was an increasingly dominant strategy in the mid-2000s to deal with the uncertainty of extending mortgages to borrowers with perceived higher risk. However, contrary to efficiency pricing rationales, whether or not a borrower received a high-cost loan may not be completely determined by individual risk characteristics but may also be influenced by the lending environment. Through multilevel modeling, this analysis investigates the influence of the publicness of the lending environment at the county level on the probability of a borrower receiving a high-cost loan in 2006. The results indicate that an increase in the publicness of a lending environment reduces the probability of a borrower receiving a high-cost (subprime) mortgage. The implications of these findings not only contribute to mortgage lending but also provide a springboard to consider a key "meta-issue" in public administration: the interplay of political and economic authority in diverse policy and management environments, and the effects on individual-level outcomes.