Competing for Deal Flow in Local Mortgage Markets

46 Pages Posted: 8 Sep 2017 Last revised: 8 Feb 2019

See all articles by Darren Aiello

Darren Aiello

Brigham Young University - Marriott School

Mark J. Garmaise

University of California, Los Angeles (UCLA) - Anderson School of Management

Gabriel Natividad

Universidad de Piura

Date Written: December 8, 2018

Abstract

How do firms compete and grow in local markets? Using inferred discontinuities in mortgage application acceptance models to generate local origination shocks, we find that the lender-specific availability of attractive local clients positively influences the future growth of business for those lenders. We show that the quickest-growing (not the largest) competitors divert applications and originations from other lenders. Facing a quickly-growing competitor, banks charge higher interest rates, partially due to the increased risk of their loans. We show evidence on a mechanism of limited client attention consistent with social and economic theories that complement resource-partitioning explanations of local competition.

JEL Classification: G21, D40

Suggested Citation

Aiello, Darren and Garmaise, Mark J. and Natividad, Gabriel, Competing for Deal Flow in Local Mortgage Markets (December 8, 2018). Available at SSRN: https://ssrn.com/abstract=3032669 or http://dx.doi.org/10.2139/ssrn.3032669

Darren Aiello (Contact Author)

Brigham Young University - Marriott School ( email )

United States

HOME PAGE: http://darrenaiello.com

Mark J. Garmaise

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Gabriel Natividad

Universidad de Piura ( email )

Calle Martir Olaya 162
Lima, Lima L18
Peru

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