Advertising Expensive Mortgages

46 Pages Posted: 16 Mar 2013 Last revised: 30 Sep 2016

See all articles by Umit G. Gurun

Umit G. Gurun

University of Texas at Dallas

Gregor Matvos

University of Texas at Austin - Department of Finance

Amit Seru

Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2016


Using information on advertising and mortgages originated by subprime lenders, we study whether advertising helped consumers find cheaper mortgages. Lenders that advertise more within a region sell more expensive mortgages, measured as the excess rate of a mortgage after accounting for borrower, contract, and regional characteristics. These effects are stronger for mortgages sold to less sophisticated consumers. We exploit regional variation in mortgage advertising induced by the entry of Craigslist and other tests to demonstrate that these findings are not spurious. Analyzing advertising content reveals that initial/introductory rates are frequently advertised in a salient fashion, where reset rates are not.

Keywords: Advertising, Policy intervention, Mortgages, Foreclosures, Housing crisis

JEL Classification: E65, G18, G21, H3, L85

Suggested Citation

Gurun, Umit G. and Matvos, Gregor and Seru, Amit, Advertising Expensive Mortgages (September 1, 2016). Journal of Finance, Forthcoming, Fama-Miller Working Paper, Kreisman Working Papers Series in Housing Law and Policy No. 10, Available at SSRN: or

Umit G. Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States


Gregor Matvos

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Amit Seru (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

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