| Chapter 1 documents the role of soft information in the mortgage market. Mortgage brokers play an important role in residential subprime mortgage market. In connecting borrowers to lenders, mortgage brokers obtain borrowers' soft information, such as the likelihood of receiving future income/wealth shock, in the process. The geographical distance between broker and borrower can represent the ease of which soft information can be acquired and utilized. Using a dataset from a large subprime lender, I document two facts: first, low-documentation loans are more likely to default when brokers are located away from properties, even after controlling for hard underwriting characteristics. Second, there is little evidence that the incremental default risk is priced. These two findings suggest that soft information is not fully-internalized in mortgage underwriting.;Chapter 2 investigates how the legal framework can affect mortgage credit supply. Because state anti-deficiency statutes rarely change over time, the opportunity to test the importance of recourse for the mortgage market is limited. I exploit the bankruptcy reform in 2005 (which effectively strengthens recourse) as a quasi-natural experiment to show that aggregate quantity of mortgage lending is increased after the reform is implemented. Lenders appear to adjust their underwriting through approval decision rather than interest rate. Overall, my study finds that strengthening recourse---while potentially useful as a tool to discourage strategic default and foreclosure---can also expand credit supply through increased collateral value.;Chapter 3 uses a novel strategy to estimate a causal impact of an amenity in the property market. Real estate externalities can create economic benefits to the local community, such as increasing consumption, reducing foreclosure and providing access to finance for entrepreneurs. Quantification of externalities can be tricky because of the vulnerability to selection and omitted variables biases. Exploiting acquisition of Wild Oats Markets by Whole Foods Market with the difference-in-difference strategy, I find that property prices within 0.5 mile of an acquired Wild Oats Markets store increase by 9.35% after the store is acquired. Price externality is stronger the less anticipated the store opening is. |
