Steering Consumers to Affiliated Financial Services: Evidence from Mortgage Referrals and Cost of Credit
65 Pages Posted: 31 May 2019 Last revised: 22 Jan 2020
Date Written: July 24, 2019
We use artificial intelligence to identify financial steering activity in residential mortgage markets. Using unique data that allow us to observe private information exchanges between listing and buyer agents, we find that over 12 percent of homes for sale had selling constraints requiring financed buyers to be cross-qualified by an affiliated lender even if they had already been pre-qualified with another lender. We find evidence that steering might actually benefit borrowers. Steered borrowers are found to obtain closing cost assistance or a lower contract rate more often than non-steered borrowers.
Keywords: Financial Steering, Mortgages, Referrals, Kickbacks, Machine Learning
JEL Classification: G21, G24, G28, R22
Suggested Citation: Suggested Citation