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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Lending Distance; Remote Lending; Loan Sales; Securitization; Residential Mortgage Lending; Loan Rate Spreads; Great Recession; Multidimensional Panel Data; Instrumental Variable Analysis
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C36 - Instrumental Variables (IV) Estimation; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C55 - Large Data Sets: Modeling and Analysis; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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