Households rejecting loan offers from banks

Yiyi Bai and Liping Lu

Journal of Banking & Finance, 2020, vol. 119, issue C

Abstract: This paper studies the mechanism of adverse selection in the credit market using a sample of mortgage applications that are approved by lenders but rejected by applicants. We find that a low-risk applicant is more likely to reject a loan offer, except when the offer is made by an informed lender. Using jumbo mortgage and loan acceptance rate data to proxy for the information advantage, we find that lenders with a lower likelihood of being rejected are indeed better informed than others.

Keywords: Mortgage lending; Information advantage; Concentrated lender (search for similar items in EconPapers)
JEL-codes: D14 G14 G21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:119:y:2020:i:c:s0378426618300918

DOI: 10.1016/j.jbankfin.2018.04.018

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