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Market power and risk: Evidence from the U.S. mortgage market

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  • Müller, Carola
  • Noth, Felix

Abstract

We use mortgage loan application data of the Home Mortgage Disclosure Act (HMDA) to shed light on the role of banks’ market power on their presumably insufficient risk screening activities in the U.S. mortgage market in the pre-crisis era. We find that banks with higher market power protect their charter value. The effect is stronger for banks that have more information about local markets.

Suggested Citation

  • Müller, Carola & Noth, Felix, 2018. "Market power and risk: Evidence from the U.S. mortgage market," Economics Letters, Elsevier, vol. 169(C), pages 72-75.
    • Handle: RePEc:eee:ecolet:v:169:y:2018:i:c:p:72-75
    DOI: 10.1016/j.econlet.2018.04.033
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    Citations

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    Cited by:

    1. van der Plaat, Mark, 2020. "Loan sales and the tyranny of tistance in U.S. residential mortgage lending," MPRA Paper 107519, University Library of Munich, Germany, revised 20 Apr 2021.
    2. Henrik Andersen & Ragnar E Juelsrud & Carola Müller, 2024. "Risk-based pricing in competitive lending markets," BIS Working Papers 1169, Bank for International Settlements.
    3. Koetter, Michael & Müller, Carola & Noth, Felix & Fritz, Benedikt, 2018. "May the force be with you: Exit barriers, governance shocks, and profitability sclerosis in banking," Discussion Papers 49/2018, Deutsche Bundesbank.

    More about this item

    Keywords

    Banking competition; Mortgage crisis; Bank risk; Information;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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