THESIS
2022
1 online resource (ix, 64 pages) : color illustrations, color maps
Abstract
Borrowers may misestimate their probability of mortgage approval in the absence of
precise signals of creditworthiness. Credit reports, which contain such signals, became
easily accessible for all U.S. consumers since 2005, while it was already the case in seven
states. A difference-in-differences strategy exploiting this change shows that pool quality
of mortgage applicants improved as a result—approvals increased, whereas subsequent
delinquencies decreased. These findings are consistent with a mechanism where
under-estimators enter the applicant pool and over-estimators drop out, because easier
access to credit reports reduces misestimation of one’s own probability of mortgage
approval. Additional findings rule out supply-driven explanations.
JEL Codes: D12, D83, G21, G28, L51
Keyword...[
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Borrowers may misestimate their probability of mortgage approval in the absence of
precise signals of creditworthiness. Credit reports, which contain such signals, became
easily accessible for all U.S. consumers since 2005, while it was already the case in seven
states. A difference-in-differences strategy exploiting this change shows that pool quality
of mortgage applicants improved as a result—approvals increased, whereas subsequent
delinquencies decreased. These findings are consistent with a mechanism where
under-estimators enter the applicant pool and over-estimators drop out, because easier
access to credit reports reduces misestimation of one’s own probability of mortgage
approval. Additional findings rule out supply-driven explanations.
JEL Codes: D12, D83, G21, G28, L51
Keywords: Credit Reports, Information Provision to Consumers, Household
Finance, Mortgages, Regulation of Credit Information
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