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Loan sales and the tyranny of distance in U.S. residential mortgage lending

van der Plaat, Mark (2020): Loan sales and the tyranny of distance in U.S. residential mortgage lending.

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Abstract

The distance between lenders and borrowers in the U.S. has increased considerably since the 1970s. This paper analyzes whether the use of loan sales by lenders has caused this increase. Using data on U.S. residential mortgage lending, we find that loan sales are associated with a 179\% higher expected lending distance, which corresponds to an extra distance of 789.6 km (490.3 miles). We provide indirect evidence that loan sales facilitate higher lending distances because they allow lenders to compete in more remote markets by reducing their loan rates.

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