Mortgage Loan Applications Research Articles

A review on American senior housing and financing decisions

Purpose The world population is getting older and housing decisions matter to the security of retirement life and well-being. However, senior housing and financing decisions are largely overlooked in the literature. This study aims to provide a comprehensive overview of the senior housing and financing decisions in the USA. Design/methodology/approach Using 2021 American Housing Survey data and ordinary least squares estimates, this paper studies senior housing and financing decisions in the 15 most populous US metropolitan areas. Multiple regressions are used to analyze the whole sample as well as various subsamples. Findings This paper finds strong evidence that seniors are more likely to own a house with a higher market value compared with nonseniors. More specifically, although race and gender do not matter in this relationship, it is less pronounced among those with higher education. Also, seniors, especially white senior homeowners, are more likely to have a lower mortgage debt burden due to a higher upfront down payment than nonseniors. Last, seniors are more likely to refinance their homes and receive cash than nonseniors. Research limitations/implications Constrained by the data limitations, this study specifically focuses on seniors’ housing and mortgage decisions. Future research could involve exploring seniors’ mortgage decisions by considering factors such as mortgage loan terms, borrower credentials and the evolving landscape of the senior housing market, among other aspects. Practical implications The findings would help policymakers and contractors in the construction industry better understand the uniqueness of challenges in the senior housing market and develop effective housing policies and programs that cater to the needs of the elderly. A comprehensive understanding of the senior housing market would also help seniors make informed purchase and financing decisions. Social implications The authors propose providing financial education to the elderly, particularly those of disadvantaged status, to improve their expertise and bargaining skills in the mortgage loan application process. Originality/value This paper contributes to understanding the dynamic senior housing market, which encounters challenges and opportunities associated with the aging population. The study fills the gap of limited research regarding seniors’ housing decision and their financing choices in the USA and would help policymakers and contractors in the construction industry develop effective housing policies and programs that cater to the needs of the elderly.

The 3 Decades Global Financial Policy Failure in Housing Market, Runaway Home Prices, Today’s Growing Homeless Crisis: Eddison Walters Real Estate Housing Technology Structural Change Transformational Theory

Failure to address technological-driven structural changes in the real estate market that began three decades ago has caused runaway home prices that developed countries are experiencing today. The real estate crash that preceded the Global Financial Crisis, and the entire Global Financial Crisis resulted from the panic that was created about the rapid increase in home prices that was falsely labeled a real estate bubble by the media which was quickly adapted by policymakers. Policymakers and the media blamed greedy mortgage brokers for the rapid increase in home prices, accusing mortgage brokers of providing mortgages to too many people for homes that the borrowers could not afford. It turns out that the media and policymakers were completely wrong when mortgage brokers were falsely blamed for creating a real estate bubble because a real estate bubble never existed. The true cause of the rapid increase in home prices was the early stages of a real estate boom from technological-driven structural changes in the real estate market. Failure to address structural changes in the real estate housing market which started three decades ago, has resulted in runaway home prices in the United States and developed countries around the world. As a result of the failure widespread economic hardship from homelessness is a significant risk as working families find themselves priced out of the housing market. Three decades of economic policy failures and the mismanagement of the housing sector have resulted in a looming housing crisis that continues to increase as developed countries face runaway home prices. Policymakers throughout developed countries eagerly accepted the media-driven misinformation of a real estate bubble without any evidence presented supporting the narrative. The failure of policymakers to gain an understanding of factors that have been driving the rapid increase in home prices which began three decades ago, resulted in the real estate crash, Global Financial Crisis, and Great Recession. Much of the economic hardship and the looming housing crisis facing working families today could have been avoided. For many working American families, the prospect of home ownership no longer exists due to skyrocketing home prices. The looming homeless crisis facing the developed world today is the direct result of economic policy failures that have ignored the structural changes in the housing market for three decades. The move from print media real estate listings to online real estate listings and the adaptation of online mortgage loan applications along with automated mortgage underwriting between 1995 and 1999, exponentially increased the quantity of inventory needed in the housing market of developed countries. The shift in the demand curve for housing structurally changed the housing market in developed countries resulting in the complete transformation that saw the demand for housing skyrocket by 2000. New homebuyers who previously only had access to local housing markets before the transformation of the housing market began in 1995, had full access to homes listed anywhere online in other real estate markets by the end of 1999. The increased demand caused the rapid growth in home prices. Failure to implement policies to drastically increase home inventory in developed countries to address the structural transformation of the housing market which drastically increased the demand for homes was a significant economic policy failure. Instead of implementing policies to significantly increase home inventory, new construction was idle for over a decade as policymakers adopted the media-driven misinformation of a real estate bubble and supported policies to address the nonexistent real estate bubble.

Déjà Vu: CEO overconfidence and bank mortgage lending in the post-financial crisis period

This study examines the impact of CEO overconfidence on banks’ mortgage lending decisions in the post-financial crisis period. We find that banks with overconfident CEOs are more likely to approve mortgage loan applications of risky borrowers. Overconfident CEOs contribute to the riskiness of mortgage lending by encouraging banks to take on more risk. The positive effect of CEO overconfidence is more pronounced in banks with powerful CEOs, weak governance, low levels of technology adoption, and limited competition. Although improved bank regulations and intensified monitoring following the crisis have reduced the magnitude of this positive impact, it still exists, albeit to a lesser extent. Our findings remain consistent after endogeneity corrections and a battery of robustness tests. Overall, this study provides additional evidence of CEO overconfidence in shaping bank lending policies.

How to build responsive service processes in German banks: the role of process documentation and the myth of automation

PurposeThis multi-method paper investigates the impact factors of process responsiveness, operationalized as process duration, in the bread-and-butter business of German banks, i.e. the private mortgage loan application evaluation process. The tested predictors refer to process design, process execution, business process management (BPM)'s relevance and information technology (IT) support.Design/methodology/approachIn a sequential research design, a total of 296 useable responses of 1,228 contacted German banks are collected using a questionnaire built from both industry insights gained through 43 expert interviews and theoretical knowledge. Ordinary least squares (OLS) regression is used to determine the relevant impact factors and moderation effects, and a theoretical framework is proposed.FindingsProper process documentation moderated by bank size is most influential for process speed, and smaller banks benefit more from it. Automation appears to have a prolonging effect on the process. Although surprising, this finding may be explained through correlation analysis of the data and studies on the Solow’ paradox in the literature.Research limitations/implicationsThe models only partially explain process responsiveness. A moderate adjusted R² and several interaction effects indicate the complexity of the presented research question. Still, several hypotheses can be confirmed, leading back to the roots of process improvement and the long-lasting question of the binary impact nature of automation.Originality/valueValuable insights for both researchers in service operations and bank practitioners are outlined, shedding light onto responsiveness as still empirically under-researched operational capability. Thereby, the authors also contribute to the superior question of strategic fit.

Digital Citizenship, Digital Banking – Digitalization Proposals by the Hungarian Banking Association : From basic banking services to mortgage loans, or how to apply for a mortgage loan in 15 minutes instead of 15 days

We present through the proposals of the Hungarian Banking Association (the ‘Association’) how further digitalisation of the individual steps of banking processes and the adoption of international good practices would improve customer experience, as well as the tools by which the banking sector could be made more competitive in international comparison. By following up on these proposals, the turnaround time of a standard mortgage loan application could be reduced from the current 15 days to only 15 minutes. Ideally, it would take such a short time for the binding bank offer and the draft loan agreement to arrive in the client’s electronic mailbox. Redesigning processes would simplify the use of other banking products and services, too.

Analysis of the Application of Management Control System for Fiduciary Installment Credit (KREASI) at PT Pegadaian Medan City Region

Management control system is a system used to influence its members to implement strategies efficiently and effectively in order to achieve organizational goals. The purpose of this study was to determine how the implementation of the management control system at PT Pegadaian Medan City Region. PT. Pawnshops also require a control in order to achieve the company's overall goals. This control is preventive and repressive control. To achieve this goal requires a good management control system so that the credit is not problematic. The purpose of this study is the application of a management control system for the distribution of Fiduciary Installment Loans (KREASI) at PT Pegadaian Manado City Region. The analytical method used is descriptive analysis. The results of the analysis show that the process of providing Installment Loans for the Fiduciary System (KREASI), at PT. The Manado Regional Pawnshop has been carried out well by competent employees in their respective fields who have high honesty and dedication in carrying out their duties. Separation of duties has also been carried out well in each process of providing Fiduciary Installment Loans (KREASI), at PT. Manado Regional Pawnshop. PT Pegadaian Manado Region has implemented proper authorization procedures in all processes of providing Fiduciary Installment Loans (KREASI), namely at the time of the mortgage loan application process, the authorized officer is the estimator, during the pawn credit analysis process the authorized officer to analyze credit is the Power of Attorney Credit (KPK), during the credit withdrawal process the authorized officer is the cashier, while for the monitoring process the officer authorized to carry out supervision is the branch head

Monetary easing and the lending concentration channel of monetary policy transmission

I use loan-level data on US mortgage loan applications to identify the effect of lending concentration on the pass-through of the 2008 monetary easing to the volume of lending. Lenders eased credit conditions but less so in counties with higher lending concentration. Furthermore, within a county, the pass-through was lower for lenders with higher local market power. The channel is active also during the 2005 monetary tightening episode. It is distinct from the deposits channel of monetary policy transmission, and its influence is ubiquitous: it affects both new loans and refinances, depository and non-depository lenders, and market leaders and laggards.

Possible income misstatement on mortgage loan applications: Evidence from the Canadian housing market

We construct a measure of possible income misstatement (PIM) for first-time homebuyers by quantifying the gap between growth in incomes reported on mortgage applications and growth in incomes reported on tax files from 2004 to 2014 in Canada. Using a two-stage least square framework to correct for the endogenous nature of house prices and PIM, we find robust evidence that part of the observed dispersion in PIM is caused by house price variation. This suggests borrowers have greater incentive to misstate income in high-priced markets. We report evidence that markets with a tendency for income misstatement also had higher default rates.

Robotic process automation and reengineering using Bizagi and UiPath: case study on mortgage request process

Recently, robotic process automation (RPA) has become increasingly adopted by different institutions in an endeavour to improve business performance. However, banking and financial institutions are still considered a slow-developing sector lacking sufficient experience with different aspects of process automation. Therefore, the main aim of this work is to examine how RPA adoption can affect the performance of banking processes by conducting a case study on the mortgage loan application process of a bank located in Saudi Arabia. A well-established methodology inspired by the business process management (BPM) lifecycle has been followed. We utilise the Bizagi (BPM) Suite to model and analyse AS-IS and TO-BE scenarios of the process. UiPath software has been used to build and configure the RPA bot. The simulation results revealed that the adoption of the RPA within the mortgage loan application process has reduced the overall cycle time of the process by approximately 14 days.

Possible income misstatement on mortgage loan applications: Evidence from the Canadian housing market

AbstractWe construct a measure of possible income misstatement (PIM) for first‐time homebuyers by quantifying the gap between growth in incomes reported on mortgage applications and growth in incomes reported on tax files from 2004 to 2014 in Canada. Using a two‐stage least square framework to correct for the endogenous nature of house prices and PIM, we find robust evidence that part of the observed dispersion in PIM is caused by house price variation. This suggests borrowers have greater incentive to misstate income in high‐priced markets. We report evidence that markets with a tendency for income misstatement also had higher default rates.

Market power and risk: Evidence from the U.S. mortgage market

We use mortgage loan application data of the Home Mortgage Disclosure Act (HMDA) to shed light on the role of banks’ market power on their presumably insufficient risk screening activities in the U.S. mortgage market in the pre-crisis era. We find that banks with higher market power protect their charter value. The effect is stronger for banks that have more information about local markets.

Can Jane Get a Mortgage Loan? Depends on When and Where

By analyzing data from 102 million mortgage loan applications in the US between 2004–2012 (about 90% of all applications) across 3,141 counties and 8,000 financial institutions, we investigate whether applicants’ gender matters in the bank's lending decision. We find evidence that female applicants face a higher rejection rate than males, holding all else constant. Similar results are obtained for Hispanic applicants compared to non-Hispanics, and minorities compared to non-minorities. Moreover, we document that this discrimination is pro-cyclical (i.e. peaks in recessions) and that it varies substantially across states. Most importantly, we show that non-economic factors help explain the variation in discrimination across states while economic factors do not. Specifically, we find that gender discrimination in lending is higher in states with (i) high level of conservatism, (ii) low support for gay rights, and (iii) low female representation in the state legislature (JEL E32, G21, J16).

Liquidity Risk and the Credit Crunch of 2007–2008: Evidence from Micro-Level Data on Mortgage Loan Applications

Recent empirical studies have shown that during the financial crisis of 2007–2008, banks that were more heavily exposed to liquidity risk contracted their supply of credit more sharply. I contribute to the identification of this effect by relying on the use of micro-level data on U.S. mortgage loan applications, which allows me to identify liquidity risk as an important determinant of the contraction of credit in the mortgage market but as separate from the precipitous fall in credit demand, disruptions in the securitization and subprime markets, shifts in asset risk, and changing risk aversion among loan officers.

Investigating the Effectiveness of Mortgage Demand and the Significant Level of the Changes: Evidence from the Intervention of the Financial Crisis

This paper aims at assessing the effectiveness of mortgage loan in order to assess the claims made by the customers regarding mortgage demand resulting from the financial crisis. Multiple method of data collection was used involving the use of questionnaires and semi-structured interviews. The findings revealed that demand have been both effective and ineffective. Demand was found to be effective were customers’ mortgage loan applications were turned down because of excess demand over supply. It was also effective where qualified lenders’ mortgage loan applications were turned down for reasons associated with nationality status. On the contrary the ineffectiveness of mortgage loan was based on the fact that someof the customers who asked for a loan were not qualified. The findings also revealed a statistically significant mean difference of 0.803, 1.375 and 2.178 in comparing the periods before and during, during and after and before and after the financial crisis respectively at 95per cent confidence interval.

Liquidity Risk and the Credit Crunch of 2007-2009

Recent empirical studies have shown that during the financial crisis of 2007-2008 banks that were more heavily exposed to liquidity risk contracted their supply of credit more sharply. I contribute to the identification of this effect by relying on the use of micro-level data on US mortgage loan applications, which allows me to identify liquidity risk as an important determinant of the contraction of credit in the mortgage market, but as separate from the precipitous fall in credit demand, disruptions in the securitization and subprime markets, shifts in asset risk, and changing risk-aversion among loan officers.

The prevalence and impact of misstated incomes on mortgage loan applications

Misstatement of income on mortgage loan applications (the “liar-loan” problem) is thought to have been a contributor to the boom and bust of mortgage markets. We provide nationwide measurements that reflect the degree to which incomes on mid-2000 home-purchase mortgage loan applications were overstated relative to the actual incomes of mortgage applicants. Our results suggest a substantial degree of income overstatement in 2005 and 2006, one consistent with the average mortgage application overstating income 15–20%. We find the tendency to misstate income was associated with markets with large home-price increases during the boom. There is little support for the proposition that income overstatement played a substantial role in subsequent mortgage defaults.

Applying for Home Mortgages in Immigrant Communities: The Case of Asian Applicants in Los Angeles

In this paper it is argued that the spatial segmentation of financial services in urban areas, generated by a combination of financial market characteristics, transnational movements of people and capital, cultural practices, ethnic resources, and social networks may produce, at the early stages of the home mortgage application process, a sorting of Asian borrowers into mortgage channels that may differ from those of other minority groups and may have, in the long run, a different impact on the exposure and vulnerability of borrowers to adverse lending practices and products. The study employs multinomial logistic regression and GIS analysis of annual Home Mortgage Disclosure Data and explores trends in home mortgage loan applications to different types of lenders by Asian, white, and other minority prospective borrowers in the Los Angeles Metropolitan Area. Findings indicate that Asian applicants feature a greater propensity to apply for mortgage loans at very large mainstream banks and Asian-owned banks than at subprime lenders compared with other minority prospective borrowers. The larger presence of competing financial institutions in Asian immigrant markets may result in a greater access by Asian prospective borrowers to more options and, possibly, to higher quality and affordable mortgage products than other pools of minority applicants. At the same time, some of the social and cultural resources typically found in ethnic enclaves may affect how Asian applicants react to the outreach practices, sorting procedures, and products offered by different lenders.

Place-Based and Race-Based Exclusion from Mortgage Loans: Evidence from Three Cities in the Netherlands

ABSTRACT:Do place and race matter in mortgage loan applications? This article presents evidence from mortgage markets in the Dutch cities of Arnhem, The Hague, and Rotterdam, suggesting that place, and to a lesser extent also race, do matter. In general, race and place are not factors of direct exclusion, but (1) zip codes are included in credit scoring systems, and (2) both place and race are significant factors in the assessments by loan officers because applicants who do not meet all formal criteria are more often accepted (“overrides”) for indigenous Dutch and low-risk neighborhoods than for ethnic minorities and high-risk neighborhoods. In addition, a “national mortgage guarantee” is compulsory for loan applications in high-risk neighborhoods and thereby used as a substitute for redlining, comparable to the compulsoriness of private mortgage insurance in the United States. Some lenders also engage in direct redlining by rejecting low-risk “national mortgage guarantee” loans in high-risk neighborhoods, a practice potentially explained by transaction cost economizing. Since the high-risk neighborhoods in all three cities accommodate relatively large shares of ethnic minority groups, they are hit twice: through place-based and through race-based exclusion. In other words, place-based disparate treatment results in race-based disparate impact. The neighborhood does matter; place-based exclusion in the mortgage market has a neighborhood effect.

Identifying Robust, Parsimonious Neighborhood Indicators

Identifying a few indicators that summarily tracked key dimensions of neighborhoods would be invaluable for neighborhood monitoring and measuring impacts of interventions. The goal of this article is to search empirically for such robust, parsimonious indicators. In five cities, the authors analyze the interrelationships among a broad set of census tract indicators related to mortgage market activity; home prices; jobs and firms; demographic, socioeconomic, and housing stock characteristics; crime; and public assistance and health. Through factor analysis, they identify four to six neighborhood dimensions among these indicators that are common across cities. Using regression, the authors identify a parsimonious number of indicators that are inexpensive, annually updated, and available for all U.S. communities yet robustly capture significant variation in these neighborhood dimensions. Home Mortgage Disclosure Act (HMDA) data on mortgage approval rates, loan amounts, and loan applications and Dunn and Bradstreet data on businesses comprise such a set for four of the dimensions.

A Note on Identification of Discrimination in Mortgage Lending

This paper shows how reduced form estimates of discrimination in mortgage lending may be biased by race differences in loan demand. The result, which follows formally from the model of the mortgage lending process developed in the seminal paper by Maddala and Trost (1982), has important implications for the regulation of financial institutions. It also reinforces findings of Rachlis and Yezer (1993) and Yezer, Phillips and Trost (1994). A review of recent empirical evidence on race differences in loan demand suggests that this factor may help explain mortgage loan application differentials.