Innovations in Information Technology and the Mortgage Market

Bulent Guler

No 856, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: contracts to prospective home buyers and the terms of these contracts depend on the observable characteristics of households. Households are born as either good credit risk types---having a high time discount factor---or bad types---having a low time discount factor. The type of the household is the only source of asymmetric information between households and lenders. I find that as lenders have better information about the type of households, the average downpayment fraction decreases together with an increase in the average mortgage premium, the foreclosure rate, and the dispersions of mortgage interest rates and downpayment fractions, which are consistent with the trends in the housing market in the last 15 years.

Date: 2010
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Journal Article: Innovations in Information Technology and the Mortgage Market (2015)
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