Search Results
Working Paper
Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data
This paper provides evidence on the relationship between differential treatment of minority borrowers and their mortgage market outcomes. Using data from a field experiment that identifies differential treatment matched to real borrower transactions in the Home Mortgage Disclosure Act (HMDA) data, we estimate difference-in-difference models between African American and white borrowers across lending institutions that display varying degrees of differential treatment. Our results show that African Americans are more likely to be in a high-cost (subprime) loan when borrowing from lenders that ...
Working Paper
The Determinants of Mortgage Denial Using Public Data
We analyze over 30 million home purchase mortgage applications from 2018-2024 using publicly available Home Mortgage Disclosure Act (HMDA) data to study the determinants of mortgage denial. We establish three primary findings. First, credit access is highly sensitive to monetary policy; the 2022-2023 tightening drove aggregate denial rates from 12.2% to 15.7% via the debt-to-income (DTI) channel. Second, we identify a critical nonlinearity in underwriting: While the 43% qualified mortgage (QM) threshold---below which lenders receive legal safe harbor from ability-to-repay claims---is ...
Report
Unintended Consequences of "Mandatory" Flood Insurance
We show that the National Flood Insurance Program inadvertently concentrated flood risk among households least able to bear it. Using nationwide flood map data, HMDA records, and credit panel data, we show: (i) insurance mandates reduce mortgage lending, particularly for low-income applicants, (ii) these households disproportionately sort into areas immediately adjacent to flood zones, where credit is still available to them but actual flood risk remains, (iii) following disasters, households in these areas experience sharp increases in debt and delinquency rates. Our results show that binary ...
Working Paper
Algorithms as Shadow Regulation: Secondary Market Access Overrides Home Buyer Credit Risk
Using confidential HMDA data on 30 million purchase applications, we show how automated underwriting distorts credit allocation. We document a severe 7.5-percentage point jump in denials at the 50% debt-to-income threshold. This "cliff" is unique to Fannie Mae’s software, whereas Freddie Mac’s algorithm exhibits no matching friction. By exploiting institutional routing to isolate secondary market access as the causal mechanism, we find a stark price-quantity asymmetry: the interest rate penalty is a mere 3 basis points, yet the threshold suppresses $7.7 billion in conventional ...
Working Paper
The Great Mortgaging: Housing Finance, Crises, and Business Cycles
This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks? balance sheets doubled in the course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have risen substantially in many countries. Financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries. Housing finance has come to play a ...
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Stakeholders’ Aversion to Inequality and Bank Lending to Minorities
We document large and persistent cross-sectional differences in banks’ propensity to lend to minorities based on bank stakeholders’ aversion to inequality. Using mortgage application data from the Home Mortgage Disclosure Act, we show that banks with more inequality-averse stakeholders are more likely to approve applications in high-minority relative to low-minority areas and, within census tracts, from non-white borrowers relative to white borrowers. These differences (i) are not driven by applicant selection or loan officer assignment, (ii) coincide with stakeholder alignment, reflected ...
Working Paper
Market Concentration in Fintech
This paper discusses concentration in consumer credit markets with a focus on fintech lenders and residential mortgages. We present evidence that shows that concentration among fintech lenders is significantly higher than that for bank lenders and other nonbank lenders. The data also show that the overall concentration in mortgage lending has declined between 2011 and 2019, driven mostly by a reduction in concentration among bank lenders. We present a simple model to show that changes in lender financial technology (interpreted as improvements in quality of loan services) explain more than ...
Working Paper
Does Banking Consolidation Harm Households?
No, in the mortgage market. Using confidential micro-level data combining mortgage contracts with credit and repayment records for 44 million loans spanning 5,000 bank mergers over nearly three decades, we find no changes to mortgage rates, approval rates, or delinquency rates. Local mortgage markets remain remarkably competitive despite consolidation, averaging over 100 active lenders in each county every post-merger quarter. Our findings reveal significant merger selection motives: large acquiring banks target community banks with relationship-intensive, portfolio-lending business models, ...
Working Paper
Which Lenders Are More Likely to Reach Out to Underserved Consumers: Banks versus Fintechs versus Other Nonbanks?
There has been a great deal of interest recently in understanding the potential role of fintech firms in expanding credit access to the underbanked and credit-constrained consumers. We explore the supply side of fintech credit, focusing on unsecured personal loans and mortgage loans. We investigate whether fintech firms are more likely than other lenders to reach out to “underserved consumers,” such as minorities; those with low income, low credit scores, or thin credit histories; or those who have a history of being denied for credit. Using a rich data set of credit offers from Mintel, ...
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Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests
The 2010s saw a profound shift towards jumbo mortgage lending by large banks that are regulated under the Dodd-Frank Act. Using data from the Home Mortgage Disclosure Act, we show that the “jumbo shift” is correlated with being subject to the Comprehensive Capital Analysis and Review (CCAR) stress tests, and that financial regulation caused CCAR-regulated banks to change preference for nonconforming relative to conforming loans of similar size. We discuss potential mechanisms through which regulation could have affected bank incentives.