Did Technology Contribute to the Housing Boom? Evidence from MERS

By: Emily Williams and Stefan Lewellen

Format:Print
| Language:English

Abstract

We examine the effects of the Mortgage Electronic Registration System, or MERS, on mortgage origination volumes and foreclosure rates prior to the Great Recession. MERS was introduced in the late 1990s and significantly reduced the cost and time associated with secondary loan sales. Using novel data from the Massachusetts Registry of Deeds, we show that the introduction of MERS led to an expansion in credit supply that was primarily fueled by non-bank lenders originating loans to low-income borrowers. We also find that foreclosure rates were higher on these loans. Our paper provides a new explanation for why credit supply increased prior to the 2008 financial crisis and why supply increases were larger in low-income areas. (Conditionally accepted at the Journal of Financial Economics)