Advantage or Disadvantage? The Changing Institutional Landscape of Underserved Mortgage Markets

Abstract

This article argues that the resolution to the banking crisis after 1989 created a set of market rules promoting financial consolidation and giving large financial conglomerates competitive advantages that could allow them to more effectively tap historically underserved mortgage markets. Focusing on Chicago during the period 1993—2000, the author assesses the role played by consolidating lenders and their counterparts in altering the allocation of home purchase mortgages so as to benefit historically underserved markets. The results indicate that even as consolidating lenders are often leaders in more permissive mortgage market outcomes, substantial variations across time and between different areas of the city are suggestive of how underserved markets fare in the new financial marketplace.