TY  - JOUR
AU  - Berndt,Antje
AU  - Hollifield,Burton
AU  - Sandås,Patrik
TI  - The Role of Mortgage Brokers in the Subprime Crisis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16175
PY  - 2010
Y2  - July 2010
UR  - http://www.nber.org/papers/w16175
L1  - http://www.nber.org/papers/w16175.pdf
N1  - Author contact info:
Antje Berndt
Carnegie Mellon University
Tepper School of Business
5000 Forbes Avenue
Pittsburgh, PA 15213
Tel: 412-268-1871
E-Mail: aberndt@andrew.cmu.edu

Burton Hollifield
Carnegie Mellon University
Tepper School of Business
5000 Forbes Avenue
Pittsburgh, PA 15213
Tel: 412-268-6505
E-Mail: burtonh@andrew.cmu.edu

Patrik Sandas
University of Virginia
McIntire School of Commerce
P.O. Box 400173
Charlottesville, VA, 22904
E-Mail: pvs6f@comm.virginia.edu
M3  - presented at "Market Institutions and Financial Market Risk", June 17-18, 2010
AB  - 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.
ER  -