A FinTech matching mortgage lenders with borrowers online and bank competition, diversification and automation opportunities
68 Pages Posted: 9 Aug 2019 Last revised: 24 Feb 2021
Date Written: August 9, 2019
How do banks offer mortgages through on online platform to areas without their branch presence? Unique data on responses from different banks to applicant households yield three salient findings: First, banks offer 4% more often and 6 basis points cheaper credit when markets have high versus low concentration, implying more profitable future business. Second, they offer 2% more often and 2 bps cheaper credit when unemployment or house price growth in the applicant’s state are one standard deviation less correlated with those at home, improving portfolio diversification. Third, these offers are increasingly automated, using available hard information more efficiently.
Keywords: Mortgage Lending, Spatial Competition, Credit Risk, Automation, FinTech, Online Pricing, Bartik instrument, Pandemic
JEL Classification: G2, L1, R3
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