Mortgage companies and regulatory arbitrage

• 成果类型: Article
• 署名作者: Demyanyk, Yuliya; Loutskina, Elena
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Cleveland; University of Virginia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.07.003
• 发表日期: 2016
• 页码: 328-351
• 关键词: Regulation; banks; Mortgage companies; mortgages; Financial crisis

摘要

Mortgage companies (MCs) do not fall under the strict regulatory regime of depository institutions. We empirically show that this gap resulted in regulatory arbitrage and allowed bank holding companies (BHCs) to circumvent consumer compliance regulations, mitigate capital requirements, and reduce exposure to loan-related losses. Compared to bank subsidiaries, MC subsidiaries of BHCs originated riskier mortgages to borrowers with lower credit scores, lower incomes, higher loan-to-income ratios, and higher default rates. Our results imply that precrisis regulations had the capacity to mitigate the deterioration of lending standards if consistently applied and enforced for all types of intermediaries. (C) 2016 Elsevier B.V. All rights reserved.