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Bank Branch Presence and Access to Credit in Low- to Moderate-Income Neighborhoods

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  • OZGUR EMRE ERGUNGOR

Abstract

Banks specialize in lending to informationally opaque borrowers by collecting soft information about them. Some researchers claim that this process requires a physical presence in the market to lower information collection costs. This paper provides evidence in support of this argument in the mortgage market for low-income borrowers whose access to credit is limited by their inadequate credit histories. Mortgage originations increase and interest spreads decline when there is a bank branch located in a low- to moderate-income neighborhood. Copyright (c) 2010 The Ohio State University.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 42 (2010)
Issue (Month): 7 (October)
Pages: 1321-1349

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Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:7:p:1321-1349

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Cited by:
  1. Ozgur Emre Ergungor & Stephanie Moulton, 2011. "Beyond the transaction: depository institutions and reduced mortgage default for low-income homebuyers," Working Paper 1115, Federal Reserve Bank of Cleveland.
  2. O. Emre Ergungor, 2009. "Foreclosures in Ohio: does lender type matter?," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
  3. O. Emre Ergungor & Stephanie Moulton, 2011. "Do bank branches matter anymore?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Aug.
  4. Kristle Romero Cort├ęs, 2012. "Did local lenders forecast the bust? Evidence from the real estate market," Working Paper 1226, Federal Reserve Bank of Cleveland.

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