Stringent rules against predatory lending may be an effective tool in combating residential foreclosures, according to a new study by researchers at the University of North Carolina at Chapel Hill. The report, just released by the UNC Center for Community Capital, concluded that states that adopted such measures reported significantly lower foreclosure rates. Further, national banks that lent in those states wrote more subprime loans that were at consistently higher risk of default — a finding driven by those banks’ ability to skirt state laws due to their pre-emption by the federal code.

While cautioning that the results were “preliminary” and warranted further study, the research center’s director, Roberto G. Quercia, said it produced some striking conclusions. “It appears that state laws did a better job of ensuring home loan quality than federal regulation, but their impact was diminished by pre-emption after 2004,” he said.

That’s the year that the Bush administration’s Comptroller of the Currency invoked federal pre-emption to protect lenders across state lines, Quercia said. As a result, national banks increased their subprime lending in states where anti-predatory loan laws would have previously forbidden the practices. The big institutions were then able to expand those states’ share of the subprime market share to 20 percent in 2007 compared with 9 percent three years earlier, according to the UNC report. Quercia said the report was especially significant because North Carolina was one of the first states to ratify legislation that barred predatory lending, and its regulations have become a model for other states in the aftermath of the subprime crisis. Under Quercia’s supervision, the Center for Community Capital has analyzed the causes of the housing crisis and offered a number of policy proposals, from reforming mortgage servicing systems to reducing principal balances on “underwater” homes. Quercia has also argued on in an essay available on Huffington Post that the housing skid couldn’t simply be explained by “irrational exuberance” or a “boom psychology.” He concluded better regulation could effectively prevent similar bursting bubbles in the future. “If the key causes of the crisis were ‘irrational’ and ‘psychological’ there is little to be done except hope for more sober behavior next time,” he wrote. “In contrast, if the key cause was real economic incentives, as we contend it was, then action to change these incentives is justified.”