Competing for Deal Flow in Local Mortgage Markets

Darren J Aiello, Mark J Garmaise and Gabriel Natividad

The Review of Corporate Finance Studies, 2023, vol. 12, issue 2, 366-401

Abstract: The U.S. mortgage market exhibits competitive instability in which some lenders rapidly emerge 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 (but not the largest) competitors divert applications and originations from other lenders. Facing a quickly growing competitor, lenders charge higher interest rates, partially because of the increased risk of their loans. Loan performance suffers for other lenders as the quickest-growing competitor’s originations increase. (JEL G21, D40)Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/rcfs/cfad001 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:12:y:2023:i:2:p:366-401.

Access Statistics for this article

The Review of Corporate Finance Studies is currently edited by Andrew Ellul

More articles in The Review of Corporate Finance Studies from Society for Financial Studies
Bibliographic data for series maintained by Oxford University Press ().