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

See all articles by Luis A. Lopez

Luis A. Lopez

University of Illinois at Chicago

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: July 24, 2019

Abstract

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

Lopez, Luis A. and McCoy, Shawn and Sah, Vivek, Steering Consumers to Affiliated Financial Services: Evidence from Mortgage Referrals and Cost of Credit (July 24, 2019). Available at SSRN: https://ssrn.com/abstract=3365347 or http://dx.doi.org/10.2139/ssrn.3365347

Luis A. Lopez (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
34
Abstract Views
376
PlumX Metrics