Home Is Where Your FinTech Loan Is

Abstract

I study the spillover effect of unsecured FinTech lending on mortgage markets. Using quasi-exogenous variation in LendingClub loan activity due to its partnership with the BancAlliance consortium of community banks in February 2015, I present causal evidence that increase in unsecured personal loans by LendingClub resulted in a significant increase in overall mortgage activity in an area. This spillover is more pronounced for new home purchase activity versus mortgage refinancings, and for borrowers who face larger information frictions in the mortgage market. Despite the increase in mortgage lending, I show that mortgage default rates did not increase. Overall, my findings uncover a new benefit of FinTech lending and provide important inputs to ongoing policy debates in the unsecured FinTech lending market.

Keywords: Mortgage Lending, FinTech Lending, Information frictions

JEL Classification: G20, G21, G23