Beyond the transaction: depository institutions and reduced mortgage default for low-income homebuyers
We evaluate the effects of the lending institution and soft information on mortgage loan performance for low-income homebuyers. We find that even after controlling for bank selection, those who receive a loan from a local bank are significantly less likely to become delinquent or default than other bank or nonbank borrowers, suggesting an information effect. These effects are most pronounced for higher-risk borrowers, who likely benefit more from informational advantages of local banks. These findings support previous research on small business lending and provide additional explanation for observed differences in mortgage loan performance between bank and nonbank lenders.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: 1455 East 6th St., Cleveland OH 44114|
Web page: http://www.clevelandfed.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rose, Morgan J., 2008. "Predatory lending practices and subprime foreclosures: Distinguishing impacts by loan category," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 13-32.
- Kau James B. & Keenan Donald C. & Kim Taewon, 1994. "Default Probabilities for Mortgages," Journal of Urban Economics, Elsevier, vol. 35(3), pages 278-296, May.
- Kau, James B, et al, 1992. "A Generalized Valuation Model for Fixed-Rate Residential Mortgages," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(3), pages 279-99, August.
- Degryse, Hans & Van Cayseele, Patrick, 2000.
"Relationship Lending within a Bank-Based System: Evidence from European Small Business Data,"
Journal of Financial Intermediation,
Elsevier, vol. 9(1), pages 90-109, January.
- Hans Degryse & Partick Van cayseele, 1998. "Relationship Lending within a Bank-based System: Evidence from European Small Business Data," Working Papers Department of Economics ces9816, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Stephanie Moulton, 2010. "Originating lender localness and mortgage sustainability: an evaluation of delinquency and foreclosure in Indiana's mortgage revenue bond program," Housing Policy Debate, Taylor & Francis Journals, vol. 20(4), pages 581-617, September.
- Ozgur Emre Ergungor, 2010.
"Bank Branch Presence and Access to Credit in Low- to Moderate-Income Neighborhoods,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(7), pages 1321-1349, October.
- O. Emre Ergungor, 2006. "Bank branch presence and access to credit in low-to-moderate income neighborhoods," Working Paper 0616, Federal Reserve Bank of Cleveland.
- Michelle A. Danis & Anthony Pennington-Cross, 2005.
"The delinquency of subprime mortgages,"
2005-022, Federal Reserve Bank of St. Louis.
- Robert Hauswald & Robert Marquez, 2006. "Competition and Strategic Information Acquisition in Credit Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 967-1000.
- Kenneth P. Brevoort & Timothy H. Hannan, 2004. "Commercial lending and distance: evidence from Community Reinvestment Act data," Finance and Economics Discussion Series 2004-24, Board of Governors of the Federal Reserve System (U.S.).
- Sumit Agarwal & Souphala Chomsisengphet & Chunlin Liu & Nicholas S. Souleles, 2010. "Benefits of relationship banking: evidence from consumer credit markets," Working Paper Series WP-2010-05, Federal Reserve Bank of Chicago.
- DeYoung, Robert & Glennon, Dennis & Nigro, Peter, 2008. "Borrower-lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 113-143, January.
When requesting a correction, please mention this item's handle: RePEc:fip:fedcwp:1115. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (4D Library)
If references are entirely missing, you can add them using this form.