Bank Branch Presence and Access to Credit in Low‐ to Moderate‐Income Neighborhoods |
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Authors: | OZGUR EMRE ERGUNGOR |
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Institution: | Ozgur Emre Ergungoris a Senior Research Economist, Research Department, Federal Reserve Bank of Cleveland (E‐mail: ozgur.e.ergungor@clev.frb.org). |
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Abstract: | 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. This paper provides evidence in support of this argument in the mortgage market for low‐income borrowers whose access to credit is limited by their inadequate credit histories. Mortgage originations increase and interest spreads decline when there is a bank branch located in a low‐ to moderate‐income neighborhood. |
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Keywords: | D82 G21 G28 R31 relationship lending mortgage market branch presence |
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