Labor Mobility and Loan Origination

50 Pages Posted: 28 Jun 2019 Last revised: 2 Sep 2021

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Yupeng Lin

National University of Singapore

Yunqi Zhang

School of Finance, Nankai University; National University of Singapore

Zilong Zhang

City University of Hong Kong

Date Written: January 12, 2020

Abstract

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

Agarwal, Sumit and Lin, Yupeng and Zhang, Yunqi and Zhang, Zilong, Labor Mobility and Loan Origination (January 12, 2020). Available at SSRN: https://ssrn.com/abstract=3411350 or http://dx.doi.org/10.2139/ssrn.3411350

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Yupeng Lin

National University of Singapore ( email )

15 Kent ridge drive
Singapore
Singapore

HOME PAGE: http://sites.google.com/site/scottlinyupeng/

Yunqi Zhang

School of Finance, Nankai University ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

National University of Singapore ( email )

4 Architecture Drive
Singapore, 117566
Singapore

Zilong Zhang (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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