Credit-rationing model similar to Stiglitz and Weiss [1981] is combined with the information externality model of Lang and Nakamura [1993] to examine the properties of mortgage markets characterized by both adverse selection and information externalities. In a credit-rationing model, additional...

Loan volume creates public information. One lender’s underwriting activities generate valuable information not only for the lender itself, but also for other lenders operating in the same neighborhood. The Lang and Nakamura (L-N) model hypothesizes that the total loan volume in a...