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The Residential Mortgage Supply Function of Commercial Banks

Author

Listed:
  • Donald R. Epley

    (Department of Finance, Insurance and Real Estate, Washington State University, POB 644746, Pullman, WA 99164, USA, depley@wsu.edu)

  • Kartono Liano

    (Department of Finance and Economics, Mississippi State University, P.O. Box 9580, Mississippi State, MS 39762-9580, USA, kliano@cobilan.msstate.edu)

Abstract

The paper develops a residential supply function for approved fixed-rate mortgages in US commercial banks as a first step to explain differences in origination patterns among groups of borrowers. It models the lender's decision to offer the borrower a risk-adjusted loan bundle relative to the terms on the credit application. The model includes multiple dependent variables that are risk-adjusted simultaneously to reflect accurately the loan officer's decision. Canonical correlation factor analysis is used to capture the lender's simultaneous decision. The loan-price ratio and contract interest rate are the most important variables in the lender supply function.

Suggested Citation

  • Donald R. Epley & Kartono Liano, 1999. "The Residential Mortgage Supply Function of Commercial Banks," Urban Studies, Urban Studies Journal Limited, vol. 36(11), pages 1959-1971, October.
    • Handle: RePEc:sae:urbstu:v:36:y:1999:i:11:p:1959-1971
    DOI: 10.1080/0042098992700
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    References listed on IDEAS

    as
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