Publications
Publications
- Forthcoming
- Management Science
Partial Deregulation and Competition: Effects on Risky Mortgage Origination
By: Marco Di Maggio, Amir Kermani and Sanket Korgaonkar
Abstract
We exploit the OCC's preemption of national banks from state laws against predatory lending as a quasi-experiment to study the effect of deregulation and its interaction with competition on the supply of complex mortgages. Following the preemption ruling, national banks significantly increased their origination of loans with prepayment penalties by comparison with national banks in states without predatory-lending laws. We highlight a competition channel: in counties where OCC-regulated lenders had larger market shares, non-OCC lenders responded by increasing their use of riskier contract features, such as deferred amortization, adjustable rates and interest-only payments, which were not restricted by the state predatory-lending laws.
Keywords
Great Recession; Subprime; Complex Mortgages; Credit Supply; Household Debt; Preemption Rule; Competition; Mortgages; Government Legislation; Credit; Financial Crisis
Citation
Di Maggio, Marco, Amir Kermani, and Sanket Korgaonkar. "Partial Deregulation and Competition: Effects on Risky Mortgage Origination." Management Science (forthcoming).
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