President Pianalto began by sharing her views on how financial innovation has reshaped the mortgage market over the past few decades. She spoke about the promises and pitfalls of that innovation and about how the current situation in the mortgage market has unfolded. Finally, she described ideas...

In this paper we investigate the history of negotiable instruments and the holder in due course rule and contrast their function and consequences in the 1700s with their function and consequences today. We explain how the holder in due course rule works and identify ways in which the rule’s...

This paper examines the impact of interest-rate and down-payment subsidies on default rates and losses given default, and finds that down-payment subsidies create successful homeowners at a lower cost than interest-rate subsidies.

We study a unique data set of borrower-level credit information from TransUnion, one of the three major credit bureaus, which is linked to a database containing detailed information on the borrowers’ mortgages. We find that the updated credit score is an important predictor of mortgage default...

This paper shows that mortgage lenders with a physical branch near the property being financed have better information about home-price fundamentals than nonlocal lenders. During the real estate run-up from 2002-06, home price growth negatively correlates with the share of loans made by local...

Relationship lending theory suggests that lenders in close proximity to their borrowers might be the most efficient providers of screening and monitoring services, because the cost of collecting information declines with distance. The author presents evidence that ties bank branch presence to...

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. The author provides evidence in support of this argument in the...

Whether mortgages are originated mostly by depository institutions regulated by the Federal agencies or by less-regulated lenders does not seem to affect the foreclosure filing rate in Ohio’s counties. What seems to matter is whether the lenders have a physical presence in the market, in which...