Premium
Bank Branch Presence and Access to Credit in Low‐ to Moderate‐Income Neighborhoods
Author(s) -
ERGUNGOR OZGUR EMRE
Publication year - 2010
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2010.00343.x
Subject(s) - argument (complex analysis) , low income , business , mortgage underwriting , economics , financial system , monetary economics , finance , mortgage insurance , demographic economics , biochemistry , chemistry , casualty insurance , insurance policy
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.