Playing Hide and Seek: How Lenders Respond to Borrower Protection

Youssef Benzarti

No 26382, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses the universe of mortgage contracts to estimate the response of high-interest lenders to borrower protection regulations aimed at simplifying and making loan terms more transparent. Using a quasi-experimental design, we find that lenders substantially reduce interest rates – by an average of 10% – in order to avoid being subject to borrower protection, without reducing amounts lent or the number of loans approved. This finding implies that a substantial number of high-interest lenders prefer to issue obfuscatory mortgage contracts with lower interest rates rather than more transparent and regulated mortgages with higher interest rates.

JEL-codes: D91 G18 G21 H10 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-ure
Note: PE
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Citations: View citations in EconPapers (1)

Published as Youssef Benzarti, 2024. "Playing Hide and Seek: How Lenders Respond to Borrower Protection," Review of Economics and Statistics, vol 106(2), pages 384-393.

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