The impact of asymmetric information about collateral values in mortgage lending
نویسنده
چکیده
I empirically analyze the sources and magnitude of asymmetric information between competing lenders in residential mortgage lending. Large property developers often cooperate with vertically integrated mortgage lenders to provide financing offers to buyers of their newly constructed homes. I show that these integrated lenders have superior information about the construction quality of individual homes and exploit this information to lend against higher quality collateral. To compensate for the resulting adverse selection non-integrated lenders charge higher interest rates when competing against an integrated lender.
منابع مشابه
Asymmetric Information about Collateral Values
I empirically analyze credit market outcomes when competing lenders are differentially informed about the expected return from making a loan. I study the residential mortgage market, where property developers often cooperate with vertically integrated mortgage lenders to offer financing to buyers of new homes. I show that these integrated lenders have superior information about the construction...
متن کاملThe Effect of Relationship Lending on Loan Contract Terms
This paper investigates the effect of relationship-lending on loan contract terms, especially on the interest rate, loan value, and collateral requirements. For this purpose, data on 4850 loans granted by a bank in 2016 is employed. Our estimations show a negative and significant relationship between the interest rate and quality and quantity of borrower-lender relationship. Furthermore, there ...
متن کاملCollateral as Signal Variable in a Business Partnership Contract: A Case Study of Refah Kargaran Bank
There is no convergence in the results of the credit relationship between the financial contracting parties (banks and customers) due to the different importance of the contract variables. Therefore, while examining the impact of the empirical relationship between the variables commercial profit-loss sharing contracts, the dual role of the collateral variable (screening and motivation) is in...
متن کاملE-commerce business models in the US home mortgage industry
The home mortgage industry is highly significant for the US economy in terms of Gross Domestic Product and employment. Despite the fact that mortgage lending is an information-intensive industry, residential mortgage lending has been characterized as traditional and slow to adopt IT. Thus, the potential impacts of e-commerce in this industry are great, making this preliminary study of IT impact...
متن کاملEfficiency in the Mortgage Lending Market: Narrowing of Spreads Between Mortgage Rates Offered by Lenders on the Internet
The semi-strong form of the Efficient Markets Hypothesis holds that prices reflect publicly available and relevant information; we hold that a similar pricing paradigm should exist in the mortgage lending markets, and that improved information flows over the past two decades have contributed to greater efficiency in the market for secured real estate loans. We believe this greater efficiency wi...
متن کامل