Essays on bank regulation, mortgages and effects on the real estate market

This series of essays intends to span from decisions facing banks with regard to customer retention and branch network in counties with less dense population, through risk factors when facing foreclosure, and how this risk differ between different markets, property types and market conditions. I then develop further on a new concept – “soft distress” – as a bridge between research on foreclosure and behavioristic approach to price discount when sellers chose to sell fast in Springer (1996), and when they face foreclosure. I also look at how monitoring data can help banks in better modeling risk based on “soft distress” measures. I then look into how banks have changed their mortgage lending strategies to face different regulatory frameworks facing Norwegian small banks, larger banks, insurance companies and international banks. Finally I look at how the lending policy of banks have implications on home prices, and look into effect where banks might contribute to increasing their risk by inflating prices. 

The main motivation for studying bank regulation, mortgages and effects on the real estate market is that the debt levels of households is at record breaking levels fueled by low interest rates, and high willingness from banks to supply more debt in pursuance of market shares. This leads to mortgage lending having increasing uncertainty, but a perception of low risk due to low historical losses. It is my main objective to explore how regulations influence the banks strategic choices, and how this in turn has implication for the real estate market and overall risk. Through exploring data on customer mobility between banks, default on unsecured lending, and implications on defaults and risk in mortgage lending I intend to show how regulations have implication on lending, and how in turn this implications effect overall risk levels. 

This is intended to be achieved through the discovery and generation of relevant primary data, the application of suitable statistical/econometric techniques to this data, and the evaluation and interpretation of the relationship between these findings and their implications for effective regulations, and monitoring of risk