Steering Consumers to Affiliated Financial Services: Evidence from Brokered Housing Transactions

65 Pages Posted: 31 May 2019

See all articles by Luis A. Lopez

Luis A. Lopez

Pennsylvania State University, Mary Jean and Frank P. Smeal College of Business

Shawn McCoy

University of Nevada, Las Vegas - College of Business - Department of Economics

Vivek Sah

University of Nevada, Las Vegas - College of Business - Department of Economics

Date Written: April 4, 2019

Abstract

We use artificial intelligence to identify financial steering activity in housing transactions. Examining data that allow us to observe private information exchanges between listing and buyer agents, we find that over 16 percent of the homes for sale had negotiation constraints requiring financed buyers to be cross-qualified by an affiliated lender even if they had already been pre-qualified with another lender. Applying a quasi-experiment, we find that affected financed buyers encountered a premium of 3.7 percent (or $5,600) for the average home. Steering also seems to reduce access to credit for African Americans, Hispanics, and women.

Keywords: Steering, Regulations, Mortgages, Housing, Machine Learning

JEL Classification: G21, G24, G28, R22

Suggested Citation

Lopez, Luis A. and McCoy, Shawn and Sah, Vivek, Steering Consumers to Affiliated Financial Services: Evidence from Brokered Housing Transactions (April 4, 2019). Available at SSRN: https://ssrn.com/abstract=3365347 or http://dx.doi.org/10.2139/ssrn.3365347

Luis A. Lopez (Contact Author)

Pennsylvania State University, Mary Jean and Frank P. Smeal College of Business ( email )

University Park, PA
United States

Shawn McCoy

University of Nevada, Las Vegas - College of Business - Department of Economics ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Vivek Sah

University of Nevada, Las Vegas - College of Business - Department of Economics ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

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