Date of Award

Spring 5-2021

Author's School

Olin Business School

Degree Name

Doctor of Business

Degree Type



My paper uses the 2015 surprise mortgage insurance premium (MIP) cut in the FHA loan market to study banks’ and shadow banks’ role in the residential mortgage market and how shadow banks increase their market share or take away the mortgage demand from traditional banks. I use the triple-differences method to study the rise of shadow banks, a MIP cut experiment. My results found that shadow banks are much more active in the FHA market and that they expand access to credit to borrowers by taking away some demand from traditional banks. I also study the impact of the MIP cut on interest rates and on loan default rates for each lender type. I conclude that non-banks are disproportionately benefited from the MIP cut because they are more likely to accommodate the riskier group of borrowers that traditional banks less focus on. Shadow banks are a main player in the market, filling in the lending gap that may not have been otherwise served by banks.

Chair and Committee

Mark Leary (Chair); Radhakrishnan Gopalan; Taylor Begley