Clogged Intermediation: Were Home Buyers Crowded Out?

Choi, Hyun-Soo; Kim, Jung-Eun

doi:10.2139/ssrn.3065618

Cited by 6 publications

(4 citation statements)

References 27 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Apart from identifying the borrower and the financial institution granting the loan, it gathers a substantial amount of relevant information about the loan, such as its amount, maturity or the existence of collateral. We focus on loans granted by commercial banks, savings banks and credit cooperatives to nonfinancial limited liability companies, 7 Sharpe and Sherlund (2016) and Choi et al (2019) also find evidence of capacity constraints. 8 Interestingly, despite different data, countries and credit markets, we find similar number of days in loan origination time for the summary statistics (compared to e.g.…”

Section: Databasesmentioning

confidence: 99%

Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

et al. 2020

View full text Add to dashboard Cite

We show that loan origination time is key for bank credit standards, defaults and failures over the cycle. We use the credit register from Spain, with the time of a loan application and its granting. When VIX is lower, banks shorten loan origination time, especially to less-capitalized firms. Bank moral hazard incentives (competition and capital) are crucial drivers. Moreover, shorter (loan-level) origination time implies higher ex-post defaults, especially for less-capitalized firms in areas with higher bank competition or when VIX is lower. Finally, shorter pre-crisis origination time involves more bank-level failures, even more than other lending conditions, consistent with lower screening.

show abstract

Section: Databasesmentioning

confidence: 99%

Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

et al. 2020

View full text Add to dashboard Cite

show abstract

“…Fuster et al (2017b) show that increases in aggregate application volumes are strongly associated with increases in processing times and higher interest rate margins, thereby attenuating the pass-through of lower mortgage rates to borrowers Sharpe and Sherlund (2016). andChoi et al (2017) also find evidence of capacity constraints, which they argue alter the mix of loan applications that lenders attract.…”

mentioning

confidence: 98%

The Role of Technology in Mortgage Lending

Fuster

Plosser

Schnabl

et al. 2019

The Review of Financial Studies

690

267

View full text Add to dashboard Cite

Technology-based ("FinTech") lenders increased their market share of U.S. mortgage lending from 2 percent to 8 percent from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20 percent faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby alleviating capacity constraints associated with traditional mortgage lending. In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so. We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.

show abstract

“…12 Third, we only include approved loans and exclude denied applications because the application-review process might progress differently for denials, and we also exclude loans that we observe to be "preapproved." Fourth, we focus on 11 Choi, Choi, and Kim (2017) and Fuster, Lo, and Willen (2017) use the same measure to capture lender operating capacity, and Fuster, Plosser, Schnabl, and Vickery (2019) use it to capture origination efficiency. Note that we focus on within-lender variation to isolate lending standards, whereas these articles analyze across-lender variation.…”

Section: Datamentioning

confidence: 99%

Does Securitization Weaken Screening Incentives?

Choi¹,

Kim²

2020

J. Financ. Quant. Anal.

Self Cite

View full text Add to dashboard Cite

We test whether lenders' screening incentives weaken when faced with the possibility of loan sales. We adopt a new measure of lending standards, the processing time for mortgage applications at the loan level, and use the collapse of the nonagency mortgage-backed securities issuance market as a natural experiment. Secondary market liquidity for nonconforming loans decreased significantly at the end of 2007, but the market for securitizing conforming loans did not experience the same breakdown. Following this event, lenders spent significantly more time screening applications for loans larger than the conforming loan limits than for those below the limits. The processing-time gap widened more for banks with lower capital, greater involvement in the originate-to-distribute model, and larger assets.

show abstract

Clogged Intermediation: Were Home Buyers Crowded Out?

Cited by 6 publications

References 27 publications

Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

The Role of Technology in Mortgage Lending

Does Securitization Weaken Screening Incentives?

Contact Info

Product

Resources

About