Labor Mobility and Loan Origination
50 Pages Posted: 28 Jun 2019 Last revised: 2 Sep 2021
Date Written: January 12, 2020
This paper examines the effect of loan officers’ labor mobility on loan origination. Relying on a spatial regression discontinuity design, we show that mortgage loans originated after the adoption of the inevitable disclosure doctrine (IDD) – a mechanism discouraging 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: Suggested Citation