Labor Mobility and Loan Origination

This paper examines whether and to what extent loan officers' labor mobility affects the origination and modification of U.S. residential mortgage loans. Our identification relies on a spatial regression discontinuity design instituted by staggered adoption of the inevitable disclosure doctrine (IDD) in different states of the U.S. We find that mortgages that originated after the adoption of the IDD are 10% less likely to default, suggesting an improvement in ex ante screening. In addition, IDD adoption leads to a reduction in the loan-to-value ratio and an increase in the interest rate unaccompanied by any decrease in the loan supply, suggesting an improvement in loan origination efficiency. Further analyses reveal that restricting loan officers' mobility increases ex post monitoring, as the loan modification rate increases and the foreclosure rate decreases after IDD adoption. These positive effects further translate into more stable housing prices. Overall, we find economically meaningful impacts of restricting loan officers' job switching on the mortgage market