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Mortgage Loan Market Segmentation and Lender Pricing Behavior

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Abstract

This study examines the ability of financial institutions to vary rates of return on mortgages by segmenting mortgage loan markets. The research indicates that product differentials do exist among financial institutions. These differences seem to be attributable to instrument-specific characteristics which result from varying levels of intermediation services and exit barriers resulting from lingering regulatory distinctions. Pricing differences as a result of product differences are significant between mortgage bankers and depository institutions which suggests that borrowers are willing to pay a premium for loans offered by banks and thrifts.

Suggested Citation

  • Harry E. Merriken, 1988. "Mortgage Loan Market Segmentation and Lender Pricing Behavior," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 9-18.
    • Handle: RePEc:jre:issued:v:3:n:1:1988:p:9-18
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    References listed on IDEAS

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    1. Lawrence Fisher, 1959. "Determinants of Risk Premiums on Corporate Bonds," Journal of Political Economy, University of Chicago Press, vol. 67, pages 217-217.
    2. Allen F. Jung, 1962. "Terms On Conventional Mortgage Loans On Existing Houses," Journal of Finance, American Finance Association, vol. 17(3), pages 432-443, September.
    3. Curley, Anthony J & Guttentag, Jack M, 1977. "Value and Yield Risk on Outstanding Insured Residential Mortgages," Journal of Finance, American Finance Association, vol. 32(2), pages 403-412, May.
    4. Robert O. Edmister & Harry E. Merriken, 1988. "Pricing Efficiency in the Mortgage Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(1), pages 50-62, March.
    5. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
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    Cited by:

    1. Liu, Benjamin & Skully, Michael, 2005. "The determinants of mortgage yield spread differentials: Securitization," Journal of Multinational Financial Management, Elsevier, vol. 15(4-5), pages 314-333, October.
    2. Wolter Hassink & Michiel Leuvensteijn, 2007. "Measuring Transparency in the Dutch Mortgage Market," De Economist, Springer, vol. 155(1), pages 23-47, March.
    3. Michiel van Leuvensteijn & Wolter Hassink, 2003. "Price-setting and price dispersion in the Dutch mortgage market," CPB Discussion Paper 21, CPB Netherlands Bureau for Economic Policy Analysis.
    4. repec:use:tkiwps:077 is not listed on IDEAS

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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