Do lenders make less-informed investments in high-growth housing markets? [electronic resource] / by Sophia Chen, Lev Ratnovski, and Yangfan Sun.

[Washington, D.C.] : International Monetary Fund, 2021.©2021

Chen, Sophia. author.

International Monetary Fund. issuing body.

01-01-2021

1 online resource (53 pages).

text

online resource

IMF working paper ; no. 21/151

IMF working paper ; no. 21/151.

WEB (Copy 1) INTERNET 1321962-1001 ONLINE

Open item 

Financial institutions

Mortgages

Residential property

Prices and charges

Risk

Economic models

Overseas item

Statistics

"May 2021"

Includes bibliographical references.

9781513573380

Nonlocal mortgage lenders with greater exposure to high-growth housing markets accept fewer loan applications in these markets and experience greater stock return volatility. When these lenders expand to high-growth markets, they also ration credit to a significantly greater degree than when they expand to other markets. Mean-variance analyses show that nonlocal lenders' exposure to high-growth markets is associated with more risk, more efficiency, and more return on mortgage portfolios. Overall, these results imply that expansion to high-growth markets leads to a decline in screening and riskier investment by nonlocal lenders, which may reflect a risk-return trade-off in their portfolio strategy.

1321962

1321962-1001

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