JOURNAL ARTICLE

Competing for Deal Flow in Local Mortgage Markets.

  • Published In: Review of Corporate Finance Studies, 2023, v. 12, n. 2. P. 366 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Aiello, Darren J; Garmaise, Mark J; Natividad, Gabriel 3 of 3

Abstract

The article investigates competitive dynamics in the U.S. residential mortgage market, focusing on how lenders respond to surges in originations by their competitors. Using lender-specific discontinuities in mortgage application acceptance rates based on debt-to-income (DTI) ratios, the authors generate exogenous local lending shocks to analyze competitive effects. They find that the quickest-growing competitors—those with the largest increases in originations—significantly reduce other lenders’ future applications and originations, while total competitor lending or the largest competitors’ lending have little impact. In response to rapid growth by these competitors, lenders tend to raise interest rates and experience deteriorating loan performance, indicating increased risk-taking and competitive fragility in the mortgage market.

Additional Information

  • Source:Review of Corporate Finance Studies. 2023/05, Vol. 12, Issue 2, p366
  • Document Type:Article
  • Subject Area:Law
  • Publication Date:2023
  • ISSN:2046-9128
  • DOI:10.1093/rcfs/cfad001
  • Accession Number:163171682
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