Individual Mortgage Lending, Public Corruption, Race and Gender: Evidence from Local Corruption Crack-Downs

Abstract

We examine how corruption influences the mortgage market. Prior research documents that corruption is most costly in cases, like home buying, where government interaction is frequent and necessary. Accordingly, after anti-corruption laws pass bank-offices both accept more mortgage applications, and offer more favorable terms (without changing future delinquency). These laws are passed largely by cities and counties, so we implement a fixed-effects structure such that our results are driven by lending decisions at the same bank office for mortgage applications across jurisdictions. We also find that the effect of these laws varies by self-reported race and gender.