Loan Sales and the Tyranny of Distance in U.S. Residential Mortgage Lending

Mark van der Plaat
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Mark van der Plaat: University of Groningen

No 2020014-EEF, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: The mean distance between borrower and lender in the U.S. residential mortgage market has been increasing for decades. In this paper we test whether loan sales allow lenders to lend at greater distances. Moreover, we test whether this effect is more pronounced for local lenders than for broad lenders. Using data on residential mortgage origination in the U.S. between 2010 and 2019, we find that loans sold in the same year of origination have a positive impact of the mean lending distances. Additionally, local banks experience a stronger effect of loan sales on their lending distance, which is decreasing as the local banks expand geographically. Our results help explain why residential mortgage markets in the U.S. are expanding.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:gro:rugsom:2020014-eef

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