A comparison of the US mortgage market before and after covid and its impact on the interest rates charged and efficiency of both fintech and traditional banks

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Burud, Waleed Suhail (2022) A comparison of the US mortgage market before and after covid and its impact on the interest rates charged and efficiency of both fintech and traditional banks. [Dissertation (University of Nottingham only)]

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Abstract

In this paper I will be discussing the presence of financial technology in the US mortgage market and how technology has helped the industry transform in the advent of the covid-19 pandemic. The mortgage industry grew significantly during the pandemic as interest rates declined to their lowest level in years and borrowers rushed to advantage from this change. As borrower demand for US mortgage loans increased, borrowers were faced with a new issue, the closure of physical bank branches due to pandemic related restrictions. Fintech lenders with their technology to process the entire mortgage application online, experienced an exponential growth in market share. Other restrictions faced by traditional banks in lending to borrowers included the regulatory restrictions imposed on traditional banks which requires them to meet certain criteria of capital requirements and face more stringent regulatory oversight. Fintech lenders do not face the same regulations as traditional banks as they do not rely on deposits for funding to issue new mortgages instead, they sell majority of their loans to Government Sponsored Enterprises (GSEs): Fannie Mae and Freddie Mac, who then securitise these mortgage loans to diversify risk and generate greater liquidity. Due to the securitisation process mortgage loans sold to GSEs are estimated to have lower rates, hence why fintech lenders are expected to offer mortgage loans at lower rates than traditional banks, while also offering greater convenience to borrowers through the use of their technologically advanced interface.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Burud, Waleed
Date Deposited: 06 Jul 2023 10:14
Last Modified: 06 Jul 2023 10:14
URI: https://eprints.nottingham.ac.uk/id/eprint/70403

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