Bank Branch Presence and Access to Credit in Low-to-Moderate Income Neighborhoods
42 Pages Posted: 24 Jan 2007 Last revised: 9 Apr 2010
Date Written: January 8, 2007
Banks specialize in lending to informationally opaque borrowers by collecting soft information about them. Some researchers claim that this process requires a physical presence in the market to lower information collection costs. I provide evidence in support of this argument in the mortgage market for low-income borrowers. Mortgage originations increase and interest spreads decline when there is a bank branch located in a low-to-moderate income neighborhood.
Keywords: relationship lending, mortgage market, branch presence, access to credit, branch proximity
JEL Classification: D82, G21, G28, R31
Suggested Citation: Suggested Citation