Abstract

http://ssrn.com/abstract=2018095
 
 

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Asymmetric Information About Collateral Values


Johannes Stroebel


New York University (NYU)

2013


Abstract:     
I empirically analyze credit market outcomes when competing lenders are differentially informed about the expected return from making a loan. I study the residential mortgage market where property developers often cooperate with vertically integrated mortgage lenders to offer financing to buyers of new homes. I show that these integrated lenders have superior information about the construction quality of individual homes and exploit this information to lend against higher-quality collateral, decreasing foreclosures by up to 40%. To compensate for this adverse selection on collateral values, non-integrated lenders charge higher interest rates when competing against a better-informed integrated lender.

Number of Pages in PDF File: 66

Keywords: Asymmetric Information, Mortgage Lending, Collateral, Banking Competition

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Date posted: March 8, 2012 ; Last revised: October 17, 2013

Suggested Citation

Stroebel, Johannes, Asymmetric Information About Collateral Values (2013). Available at SSRN: http://ssrn.com/abstract=2018095 or http://dx.doi.org/10.2139/ssrn.2018095

Contact Information

Johannes Stroebel (Contact Author)
New York University (NYU) ( email )
Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States
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