Keywords
mortgage competition, lending shocks
Abstract
The U.S. mortgage market exhibits competitive instability in which some lenders emerge rapidly from the fringe to substantial market shares. Using inferred discontinuities in application acceptance models to generate local lending shocks, we analyze the impact on a lender of a surge in originations by its competitors. We show that the quickest-growing (not the largest) competitors divert applications and originations from other lenders. Facing a quickly-growing competitor, lenders charge higher interest rates, partially due to the increased risk of their loans. Loan performance suffers for other lenders as the quickestgrowing competitor’s originations increase.
Original Publication Citation
Competing for Deal Flow in Local Mortgage Markets (2023) with Mark Garmaise and Gabriel Natividad, Review of Corporate Finance Studies, Volume 12, Issue 2, Pages 366–401.
BYU ScholarsArchive Citation
Aiello, Darren; Garmaise, Mark; and Natividad, Gabriel, "Competing for Deal Flow in Local Mortgage Markets" (2022). Faculty Publications. 9128.
https://scholarsarchive.byu.edu/facpub/9128
Document Type
Peer-Reviewed Article
Publication Date
2022
Publisher
Review of Corporate Finance Studies
Language
English
College
Marriott School of Business
Department
Finance
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