NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Role of Mortgage Brokers in the Subprime Crisis

Antje Berndt, Burton Hollifield, Patrik Sandås

NBER Working Paper No. 16175
Issued in July 2010
NBER Program(s):   AP

Prior to the subprime crisis, mortgage brokers originated about 65% of all subprime mortgages. Yet little is known about their behavior during the runup to the crisis. Using data from New Century Financial Corporation, we find that brokers earned an average revenue of $5,300 per funded loan. We decompose the broker revenues into a cost and a profit component and find evidence consistent with brokers having market power. The profits earned are different for different types of loans and vary with borrower, broker, regulation and neighborhood characteristics. We relate the broker profits to the subsequent performance of the loans and show that brokers earned high profits on loans that turned out to be riskier ex post.

download in pdf format
   (1092 K)

email paper

This paper is available as PDF (1092 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: The Role of Mortgage Brokers in the Subprime Crisis, Antje Berndt, Burton Hollifield, Patrik Sandås, in Market Institutions and Financial Market Risk (2012), Elsevier, Journal of Financial Economics

Users who downloaded this paper also downloaded these:
Goetzmann, Peng, and Yen w15334 The Subprime Crisis and House Price Appreciation
Kleiner and Todd w13684 Mortgage Broker Regulations That Matter: Analyzing Earnings, Employment, and Outcomes for Consumers
Eichengreen, Mody, Nedeljkovic, and Sarno w14904 How the Subprime Crisis Went Global: Evidence from Bank Credit Default Swap Spreads
Mian, Sufi, and Trebbi w16107 The Political Economy of the Subprime Mortgage Credit Expansion
Mayer and Pence w14083 Subprime Mortgages: What, Where, and to Whom?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us