Households rejecting loan offers from banks

Yiyi Bai, Liping Lu

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper studies the mechanism of adverse selection in the credit market using a sample of mortgage applications that are approved by lenders but rejected by applicants. We find that a low-risk applicant is more likely to reject a loan offer, except when the offer is made by an informed lender. Using jumbo mortgage and loan acceptance rate data to proxy for the information advantage, we find that lenders with a lower likelihood of being rejected are indeed better informed than others.

LanguageEnglish
JournalJournal of Banking and Finance
DOIs
Publication statusAccepted/In press - 1 Jan 2018

Fingerprint

Loans
Household
Mortgages
Information advantage
Acceptance
Adverse selection
Credit markets

Keywords

  • Concentrated lender
  • Information advantage
  • Mortgage lending

Cite this

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abstract = "This paper studies the mechanism of adverse selection in the credit market using a sample of mortgage applications that are approved by lenders but rejected by applicants. We find that a low-risk applicant is more likely to reject a loan offer, except when the offer is made by an informed lender. Using jumbo mortgage and loan acceptance rate data to proxy for the information advantage, we find that lenders with a lower likelihood of being rejected are indeed better informed than others.",
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Households rejecting loan offers from banks. / Bai, Yiyi; Lu, Liping.

In: Journal of Banking and Finance, 01.01.2018.

Research output: Contribution to JournalArticleAcademicpeer-review

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