Do FinTech Mortgage Lenders Fill the Credit Gap? Evidence from Natural Disasters

Abstract

After exogenous demand shocks caused by natural disasters, FinTech lenders are more responsive to increased demand for reconstruction mortgages than traditional banks and non-FinTech shadow banks. Both FinTech and traditional banks increase credit supply, but FinTech supply is more elastic without increases in risk-adjusted interest rates or delinquency rates. Comparing lending supply channels, banks respond to regulatory incentives to lend to damaged areas, whereas FinTech lenders supply more credit when traditional banks rely more on balance sheet financing and physical branch networks. Compared to traditional banks, FinTech lenders increase supply elasticity more aggressively in response to local competitive pressure.

The Future of Mortgage Financing in the Era of Fintech: A Systematic Review

“…This research highlights the significance of understanding the complex interplay among these variables for the purpose of achieving sustainable economic development and financial stability. This is accomplished by synthesizing evidence from Allen et al (2023), Fuster et al (2019), Fuster et al (2021a), Haupert (2022, Karkkainen (2023), Pierri and Timmer (2020), and Shakya and Smys (2021). In addition to extending the conclusions of previous research, the findings of this study provide further evidence.…”

“…Unlocking the potential of the mortgage industry in USA is the crucial element that leads to financial and fostering economic growth. According to Allen et al (2023), Karkkainen (2023), and Haupert (2022) Mortgage market is essential for sustainable growth, as indicated by recent results that emphasize key variables such as financial technology (fintech), innovation, borrowing habits, and nonperforming loans. These findings highlight the importance of the mortgage market.…”

When climate meets real estate: A survey of the literature

“…Evidence exists that lenders are tightening credit standards after a disaster (Duanmu et al, 2022) and in flood zones (Sastry, 2022). Allen et al (2023) demonstrate that nonbank lenders may be filling a lending void by showing that nonbanks are more responsive after disasters than traditional banks. argue that disasters are not bad for bank performance partially due to the subsequent demand for loans after a disaster and that banks (particularly local banks) tend to not originate mortgages in flood-prone areas in the first place, the latter suggesting lenders may have local knowledge of flood risk.…”

“…Allen et al. (2023) demonstrate that nonbank lenders may be filling a lending void by showing that nonbanks are more responsive after disasters than traditional banks. Blickle et al.…”