NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Patrik Sandas

University of Virginia
McIntire School of Commerce
P.O. Box 400173
Charlottesville, VA, 22904

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NBER Working Papers and Publications

July 2010The Role of Mortgage Brokers in the Subprime Crisis
with Antje Berndt, Burton Hollifield: w16175
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.

Published: The Role of Mortgage Brokers in the Subprime Crisis, Antje Berndt, Burton Hollifield, Patrik Sandås. in Market Institutions and Financial Market Risk, Carey, Kashyap, Rajan, and Stulz. 2012

June 2010The Role of Mortgage Brokers in the Subprime Crisis
with Antje Berndt, Burton Hollifield
in Market Institutions and Financial Market Risk, Mark Carey, Anil Kashyap, Raghuram Rajan, and René Stulz, organizers
 
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