Keywords: Savings and loans, savings associations, mortgages, commercial banks, community lending
Abstract: In this paper, we investigate whether elimination of the savings association charter might
reduce lending to nontraditional mortgage borrowers. We present a theoretical model of lender
portfolio choice, in which nontraditional lenders have some market power and traditional lenders
are price-takers in the mortgage market. The comparative statics indicate differences between
nontraditional and traditional lenders in terms of their asset allocation responses to changes in
borrower income and house prices. Empirical tests indicate the absence of such differences
between savings associations and commercial banks, suggesting that elimination of the savings
association charter would not impair lending to nontraditional mortgage borrowers.
Full paper (2754 KB PDF)
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Last update: July 9, 1998