Do FinTech Mortgage Lenders Fill the Credit Gap? Evidence from Natural Disasters

64 Pages Posted: 7 Jul 2020 Last revised: 27 Jan 2021

See all articles by Linda Allen

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Yu Shan

Concordia University - John Molson School of Business

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Date Written: June 12, 2020

Abstract

After exogenous shocks caused by natural disasters, FinTech lenders satisfy the surge in demand for reconstruction mortgages more than traditional banks and non-FinTech shadow banks. Although both FinTech and traditional bank lenders increase mortgage availability, FinTech lenders relax underwriting standards without raising interest rates or delinquency rates. Comparing lending supply channels, traditional banks respond to regulatory incentives to lend to damaged areas, whereas FinTech lenders exploit bank reliance on balance sheet lending to expand supply. FinTech lenders relax underwriting standards when under competitive pressure from traditional banks, but traditional banks do not use underwriting standards to compete with FinTech lenders.

Keywords: FinTech, Mortgage, Lending, Shadow Banks, Natural Disasters, Household Finance

JEL Classification: G20, G21, G24, G28

Suggested Citation

Allen, Linda and Shan, Yu and Shen, Yao, Do FinTech Mortgage Lenders Fill the Credit Gap? Evidence from Natural Disasters (June 12, 2020). Available at SSRN: https://ssrn.com/abstract=3625325 or http://dx.doi.org/10.2139/ssrn.3625325

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States
646-312-3463 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://stern.nyu.edu/~lallen

Yu Shan (Contact Author)

Concordia University - John Molson School of Business ( email )

1450 Guy Street, MB 12.217
Montreal, Quebec H3H 0A1
Canada
(514) 848-2424 (Phone)

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Ave
New York, NY 10010
United States

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