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Loan sales and the tyranny of tistance in U.S. residential mortgage lending

Mark van der Plaat

MPRA Paper from University Library of Munich, Germany

Abstract: The distance between lenders and borrowers in the U.S. has increased considerably since the 1970s. This paper analyzes whether the use of loan sales by lenders has caused this increase. Using data on U.S. residential mortgage lending, we find that loan sales on average increase the lending distance with approximately 47%, which corresponds to 206.9 km (128.6 miles). Loan sales are able to increase lending distances because they allow lenders to reduce their loan rates, which allows them to compete for loans in remote markets. We find that loan sales almost completely offset higher loan rates of remote lenders.

Keywords: Lending Distance; Remote Lending; Loan Sales; Securitization; Residential Mortgage Lending; Loan Rate Spreads; Great Recession; Multidimensional Panel Data (search for similar items in EconPapers)
JEL-codes: C33 C55 G21 G23 R31 (search for similar items in EconPapers)
Date: 2020-09-28, Revised 2021-04-20
New Economics Papers: this item is included in nep-ban and nep-ure
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