Working Paper: NBER ID: w24500
Authors: Andreas Fuster; Matthew Plosser; Philipp Schnabl; James Vickery
Abstract: Technology-based ("FinTech") lenders increased their market share of U.S. mortgage lending from 2% to 8% from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20% faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby alleviating capacity constraints associated with traditional mortgage lending. In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so. We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.
Keywords: Fintech; Mortgage Lending; Technology; Efficiency; Refinancing
JEL Codes: G21; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fintech lending (G21) | processing times (C41) |
| fintech lending (G21) | default rates (E43) |
| fintech lending market share (G21) | refinancing likelihood (G51) |
| application volume (C01) | processing times for traditional lenders (G21) |
| application volume (C01) | processing times for fintech lenders (G21) |
| fintech lending (G21) | targeting of marginal borrowers (G21) |