What Broker Charges Reveal About Subprime Mortgage Credit Risk

46 Pages Posted: 22 Mar 2010 Last revised: 9 Jun 2020

See all articles by Antje Berndt

Antje Berndt

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Applied Statistics

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business

Patrik Sandås

University of Virginia

Multiple version iconThere are 3 versions of this paper

Date Written: May 8, 2020

Abstract

Prior to the subprime crisis, mortgage brokers charged higher fees for subprime loans that turned out to be riskier ex post, even when conditioning on other risk characteristics. Borrowers who paid higher conditional fees were inherently more risky, not just because they paid higher fees. The association between conditional fees and delinquency risk was stronger for purchase rather than refinance loans, and for loans originated by brokers who had less frequent interactions with the lender. This work sheds light on how regulation that limits origination charges to a fixed fraction of the loan amount may impact mortgage lending.

Keywords: Mortgage brokers, Loan performance, Subprime crisis

JEL Classification: G12, G18, G21, G32

Suggested Citation

Berndt, Antje and Hollifield, Burton and Sandas, Patrik, What Broker Charges Reveal About Subprime Mortgage Credit Risk (May 8, 2020). Available at SSRN: https://ssrn.com/abstract=1573312 or http://dx.doi.org/10.2139/ssrn.1573312

Antje Berndt (Contact Author)

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Applied Statistics ( email )

Canberra, ACT 0200
Australia

HOME PAGE: http://www.cbe.anu.edu.au/about/staff-directory/?profile=Antje-Berndt

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
(412) 268-6505 (Phone)
(412) 268-6837 (Fax)

Patrik Sandas

University of Virginia ( email )

McIntire School of Commerce
Charlottesville, VA 22904
United States
1-434-243-2289 (Phone)

HOME PAGE: http://www.comm.virginia.edu/faculty_research/staff_directory/sandas.html

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