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Nonlocal Mortgage Lending and the Secondary Market Involvement

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  • Yilan Xu
  • Jipeng Zhang

Abstract

This paper documents that out-of-state nonlocal mortgages, originated by state-chartered 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.

Suggested Citation

  • Yilan Xu & Jipeng Zhang, 2012. "Nonlocal Mortgage Lending and the Secondary Market Involvement," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 20(2), pages 307-322, March.
    • Handle: RePEc:taf:rjelxx:v:20:y:2012:i:2:p:307-322
    DOI: 10.1080/10835547.2014.12090330
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