Social Capital and Mortgages

Xudong An, Sadok El Ghoul, Omrane Guedhami, Ross Levine (rosslevine@stanford.edu) and Raluca Roman (raluca.roman@phil.frb.org)

No 23-23, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Using comprehensive mortgage-level data, we discover that the social capital of the community in which households live positively influences the likelihood of the approval of their mortgage applications, the terms of approved mortgages, and the subsequent performance of those mortgages. The results hold when conditioning on extensive household and community characteristics and a battery of fixed effects, including individual effects, data permitting, and when employing instrumental variables and propensity score matching to address identification and selection concerns. Concerning causal mechanisms, evidence suggests that social capital enhances lender screening and monitoring of borrowers and increases the social costs to borrowers of defaulting on their debts.

Keywords: consumer credit; mortgage approval; screening; loan performance; social capital; interpersonal connections; trust; banks; fintech (search for similar items in EconPapers)
JEL-codes: D10 D12 E58 G01 G28 (search for similar items in EconPapers)
Pages: 61
Date: 2023-10-12
New Economics Papers: this item is included in nep-ban, nep-soc and nep-ure
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DOI: 10.21799/frbp.wp.2023.23

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