Neighborhood Information and Home Mortgage Lending

Posted: 20 May 1998

See all articles by Robert B. Avery

Robert B. Avery

Board of Governors of the Federal Reserve System

Patricia E. Beeson

University of Pittsburgh - Office of the Provost

Mark S. Sniderman

Federal Reserve Bank of Cleveland

Abstract

We use individual-level mortgage application data to empirically test for scale economies in neighborhood lending, and find evidence of significant economies associated with the scale of operation of individual lenders in a neighborhood. The inability to exploit these economies of scale is found to explain a substantial portion of the higher denial rates observed in low income and minority neighborhoods, where the markets are generally thin. this is consistent with arguments that lenders rationally redline these neighborhoods, and suggest that policies that encourage lenders to share information, or to specialize in lending in these neighborhoods should increase credit flows to these neighborhoods.

JEL Classification: G21, G28, R31

Suggested Citation

Avery, Robert B. and Beeson, Patricia E. and Sniderman, Mark S., Neighborhood Information and Home Mortgage Lending. Available at SSRN: https://ssrn.com/abstract=87188

Robert B. Avery (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2906 (Phone)
202-452-5295 (Fax)

Patricia E. Beeson

University of Pittsburgh - Office of the Provost ( email )

Pittsburgh, PA 15260
United States

Mark S. Sniderman

Federal Reserve Bank of Cleveland ( email )

P.O. Box 6387
Cleveland, OH 44101-1387
United States

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