Regulating Zombie Mortgages
Jonathan Lee, Duc Duy Nguyen, Huyen Nguyen
IWH Discussion Papers,
No. 16,
2024
Abstract
Using the adoption of Zombie Property Law (ZL) across several US states, we show that increased lender accountability in the foreclosure process affects mortgage lending decisions and standards. Difference-in-differences estimations using a state border design show that ZL incentivizes lenders to screen mortgage applications more carefully: they deny more applications and impose higher interest rates on originated loans, especially risky loans. In turn, these loans exhibit higher ex-post performance. ZL also affects lender behavior after borrowers become distressed, causing them to strategically keep delinquent mortgages alive. Our findings inform the debate on policy responses to foreclosure crises.
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Macro data interactive
Macro data interactive This service provides time series from official publications (Statistisches Bundesamt [German Federal Statistical Office], Arbeitskreis Volkswirtschaftliche…
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Diversity
Diversity We have signed the Diversity Charter and actively commit to a culture of diversity. IWH stands for a working environment that is free of biases and barrier-free: A…
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Privacy
Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
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Diversity
Diversity We have signed the Diversity Charter and actively commit to a culture of diversity. IWH stands for a working environment that is free of biases and barrier-free: A…
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Occupational Safety
Occupational Safety Guideline on Cost Coverage for Display Screen Spectacles (PDF, 130 kB)
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VC Participation and Failure of Startups: Evidence from P2P Lending Platforms in China
Iftekhar Hasan, Xiaoyang Li
Finance Research Letters,
May
2021
Abstract
We investigate how VC participation affects the failure of startups. Using a unique dataset of the survival of peer-to-peer (P2P) platforms in China, we identify two types of failures, bankruptcy, and run off with investors' money. The Competing Risk Model results show that while VC participation reduces bankruptcy hazard, it has little impact on the runoff failures. The findings are robust to the use of matched subsamples that disentangle the influence of pre-investment screening by VC. Further analysis of exit routes reveals that conditional on failure, VC participation is associated with a higher chance of running for the exit.
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Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort under an Incomplete Contract
Patrick Behr, Alejandro H. Drexler, Reint E. Gropp, Andre Guettler
Journal of Financial and Quantitative Analysis,
No. 4,
2020
Abstract
We investigate the implications of providing loan officers with a nonlinear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the main activities that loan officers perform: loan prospecting, screening, and monitoring. We find that when loan officers are at risk of losing their bonuses, they increase prospecting and monitoring. We further show that loan officers adjust their behavior more toward the end of the month when bonus payments are approaching. These effects are more pronounced for loan officers with longer tenures at the bank.
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What Drives Discretion in Bank Lending? Some Evidence and a Link to Private Information
Gene Ambrocio, Iftekhar Hasan
Journal of Banking and Finance,
2019
Abstract
We assess the extent to which discretion, unexplained variations in the terms of a loan contract, has varied across time and lending institutions and show that part of this discretion is due to private information that lenders have on their borrowers. We find that discretion is lower for secured loans and loans granted by a larger group of lenders, and is larger when the lenders are larger and more profitable. Over time, discretion is also lower around recessions although the private information content is higher. The results suggest that bank discretionary and private information acquisition behavior may be important features of the credit cycle.
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Market Power and Risk: Evidence from the U.S. Mortgage Market
Carola Müller, Felix Noth
Economics Letters,
2018
Abstract
We use mortgage loan application data of the Home Mortgage Disclosure Act (HMDA) to shed light on the role of banks’ market power on their presumably insufficient risk screening activities in the U.S. mortgage market in the pre-crisis era. We find that banks with higher market power protect their charter value. The effect is stronger for banks that have more information about local markets.
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