English, Article edition: The Pricing of Mortgages by Brokers: An Agency Problem? Michael LaCour-Little

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Physical Description
  • article
Language
  • English

Edition details

Title
  • The Pricing of Mortgages by Brokers: An Agency Problem?
Author
  • Michael LaCour-Little
Physical Description
  • article
Notes
  • 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. In this paper, we describe 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. Results suggest 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.
  • RePEc:jre:issued:v:31:n:2:2009:p:235-264
Language
  • English
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