Labor Mobility and Loan Origination

Journal of Financial and Quantitative Analysis, accepted

59 Pages Posted: 28 Jun 2019 Last revised: 7 Feb 2023

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Yupeng Lin

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN)

Yunqi Zhang

School of Finance, Nankai University; National University of Singapore

Zilong Zhang

Zhejiang University

Date Written: February 6, 2023

Abstract

We find that mortgage loans originated after the adoption of the inevitable disclosure doctrine (IDD) – a mechanism discouraging loan officers’ labor mobility – have a lower default probability, a higher loan modification rate, and a lower foreclosure rate. These effects are unaccompanied by any reduction in loan supply and contribute to more stable housing prices. Using the adoption of the Uniform Trade Secrets Act as an alternative identification generates consistent results. Overall, our findings suggest that restricting loan officers’ labor mobility leads to better ex ante screening and ex post monitoring, improving the origination efficiency for U.S. residential mortgage loans.

Keywords: Mortgage Default, Modification, Loan Screening, Labor Mobility, Trade Secret Law

JEL Classification: D82, G21, J6

Suggested Citation

Agarwal, Sumit and Lin, Yupeng and Zhang, Yunqi and Zhang, Zilong, Labor Mobility and Loan Origination (February 6, 2023). Journal of Financial and Quantitative Analysis, accepted, Available at SSRN: https://ssrn.com/abstract=3411350 or http://dx.doi.org/10.2139/ssrn.3411350

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Yupeng Lin

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN) ( email )

Singapore

Yunqi Zhang

School of Finance, Nankai University ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

National University of Singapore ( email )

4 Architecture Drive
Singapore, 117566
Singapore

Zilong Zhang (Contact Author)

Zhejiang University ( email )

Yuhangtang Road 866
Hangzhou, Zhejiang 310058
China

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