Information, neighborhood characteristics, and home mortgage lending

This study explores the role of information externalities and neighborhood characteristics in mortgage lending. It assumes that a lender's knowledge a bout a neighborhood depends on its physical distance to that neighborhood. In addition, this paper proposes a measure of correlation in outcomes of lo ans made for neighboring properties, to assess the effect of neighborhood a ttributes. The empirical results reveal that loan rejection rates rise with increases in the lender-property distance for applications received by sma ll institutions. Furthermore, the effect of neighborhood attributes is mode st, conditional on loan, applicant, and lender characteristics. Further exp loration indicates group disparities in these effects. (C) 2000 Academic Pr ess.