Impact of firm-level bank consolidation on mortgage loan availability
Abstract
Since the economic crisis of 2008, the number of U.S. banks has declined by an average of 4.5% per year. Factors in bank decline include consolidation due to increased competition from nonbank entities, technological shifts, changing consumer preferences, and increasing regulatory requirements. Recent research concludes that bank consolidation creates small business lending credit gaps. By examining the impact of bank consolidation on the potential credit gaps in mortgage lending, I add to the bank consolidation literature and its potential consumer consequences in a highly regulated and competitive industry. I examine bank consolidation effects on (1) the quantity and value of loans originated, (2) the average mortgage loan value, (3) the percent of bank mortgage loan focus to total loans, (4) the influence of acquirers’ loan specialization on loan originations, and (5) the influence of acquirers’ headquarter locations on loan originations. Using a sample size of 1,562 Home Mortgage Disclosure Act of 1974 (HMDA) and FDIC Bank combinations for the periods 2010 through 2020, I test nine hypotheses using univariate analysis and regression models. Of the nine hypotheses, and contrary to my predictions, Hypotheses 3 and 4 results indicate a significant positive relationship between bank consolidation effects and the likelihood of lower average mortgage loan amounts and increased mortgage lending to total lending post-consolidation. Although the remainder of the hypotheses tests did not render significant results, the results prompt avenues of future research in relative size disparities in target and acquiring bank consolidations.
Collections
- OSU Dissertations [11222]