Nonlocal mortgage lending and the secondary market involvement
Date of Issue2012
School of Humanities and Social Sciences
This paper documents that out-of-state nonlocal mortgages, originated by statechartered banks, are more likely to be subprime (high-priced) loans and are sold more to the secondary market than other types of mortgages, based on the data collected under the Home Mortgage Disclosure Act from 2005 to 2008. We find that the demand for nonlocal mortgages is larger in the neighborhood where the denial rate of mortgage applications to local banks is higher, suggesting that the borrowers of nonlocal mortgages are less creditworthy. Furthermore, a bank makes more nonlocal mortgages to out-of-state borrowers if it is involved more in the secondary market.
Journal of real estate literature
© 2012 American Real Estate Society. This paper was published in Journal of Real Estate Literature and is made available as an electronic reprint (preprint) with permission of American Real Estate Society. The paper can be found at the following official URL: http://www3.ntu.edu.sg/home/jpzhang/xz_JERL.pdf. One print or electronic copy may be made for personal use only. Systematic or multiple reproduction, distribution to multiple locations via electronic or other means, duplication of any material in this paper for a fee or for commercial purposes, or modification of the content of the paper is prohibited and is subject to penalties under law.