Lending behavior of concentrated banks: Evidence from the housing boom and the following bust
Authors: Özlem Dursun-de Neef (Goethe University)
Title: Lending behavior of concentrated banks: Evidence from the housing boom and the following bust
Abstract: This paper studies the link between geographic loan concentration and lending behavior of banks during the U.S. housing boom and the subsequent bust. Banks that concentrate in a few markets increased their mortgage lending less during the boom and reduced their mortgage lending less during the bust. In the aggregate, MSAs with greater exposure to concentrated banks before the boom experienced less inflation in housing prices during the boom and a smaller decline in housing prices during the bust. The results imply that geographic loan concentration was associated with less excessive credit expansion in the boom, and this mitigated the runup and ensuing collapse in housing prices.