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Competition in mortgage markets: the effect of lender type on loan characteristics

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  • Richard J. Rosen

Abstract

This article examines how competition among lenders affects mortgage loan characteristics. The author finds that, on average, banks issue safer mortgages than independent mortgage banks. Further, mortgages from banks with a branch in the local market where the property is tend to be safer than mortgages from banks without a local branch. Changes in market shares among lender types (local bank, nonlocal bank, or independent mortgage bank) that lead to higher loan risk also are associated with better borrower quality. Increasing the local market share of a lender type raises loan risk and borrower quality at that lender type.

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File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2011/1qtr2011_part1_rosen.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2011)
Issue (Month): Q I ()
Pages: 2-21

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Handle: RePEc:fip:fedhep:y:2011:i:qi:p:2-21:n:v.35no.1

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Related research

Keywords: Mortgage loans ; Mortgages ; Home Mortgage Disclosure Act;

References

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  1. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
  2. Cabray L. Haines & Richard J. Rosen, 2007. "Bubble, bubble, toil, and trouble," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 16-35.
  3. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
  4. Geetesh Bhardwaj & Rajdeep Sengupta, 2008. "Where's the smoking gun? a study of underwriting standards for US subprime mortgages," Working Papers 2008-036, Federal Reserve Bank of St. Louis.
  5. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
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