Abstract
Mortgage brokers have grown in importance in the home mortgage origination process in recent years, suggesting they provide a valuable service matching borrowers and lenders, although their involvement has also been linked to the recent surge in mortgage defaults and foreclosures. As in other markets dominated by brokers, agents’ incentives are often poorly aligned with those with whom they do business, in this case both the lenders who bear the risks once the loan is originated and the consumer who assumes liability for the debt and contract terms. This paper describes the institutional arrangements under which mortgage brokers operate and empirically test whether loans originated by mortgage brokers are lower in cost than those that would be available directly from retail lenders. The results suggest that loans originated by brokers cost borrowers about 20 basis points more, on average, than retail loans and that this premium is higher for lower income and lower credit score borrowers.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
