Did Technology Contribute to the Housing Boom? Evidence from MERS

57 Pages Posted: 18 Mar 2021

See all articles by Stefan Lewellen

Stefan Lewellen

Pennsylvania State University - Department of Finance

Emily Williams

Harvard Business School

Date Written: March 16, 2021

Abstract

We examine the effects of the Mortgage Electronic Registration System, or MERS, on mortgage origination volumes and foreclosure rates prior to the Great Recession. MERS was introduced in the late 1990s and significantly reduced the cost and time associated with secondary mortgage sales. Using novel data from the Massachusetts Registry of Deeds, we show that the introduction of MERS led to an expansion in mortgage credit supply that was primarily fueled by nonbank lenders originating mortgages to low-income borrowers. We also find that foreclosure rates were higher on these mortgages. Our paper provides a new explanation for the credit supply increases observed prior to the 2008 financial crisis and for the disproportionate supply increase observed in low-income areas.

Keywords: Credit supply, Housing boom, Financial innovation, Fintech, Mortgages, Nonbank lenders

JEL Classification: D22, D24, G21, G23, G51, L11, O3

Suggested Citation

Lewellen, Stefan and Williams, Emily, Did Technology Contribute to the Housing Boom? Evidence from MERS (March 16, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3806188

Stefan Lewellen (Contact Author)

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

Emily Williams

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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