Mortgage Brokers and the Refinancing Transaction: Evidence from CRA Borrowers

Posted: 1 Oct 2010

See all articles by Jonathan Spader

Jonathan Spader

Harvard University - Joint Center for Housing Studies

Roberto Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning

Date Written: September 29, 2010

Abstract

This study adds to an emerging literature on the lending practices of mortgage brokers during the run-up in home prices prior to 2006. Following a sample of low- and moderate-income borrowers through the first years following home purchase, the analysis identifies differences in the refinancing transaction associated with the use of mortgage brokers vs. retail lenders. Specifically, the analysis includes measures of the refinancing process, including whether the lender initiated contact with the borrower, whether the terms of the mortgage changed at closing, and the level of borrower satisfaction in hindsight. Care must be taken in extrapolating from this sample to the broader mortgage market, as all borrowers refinanced out of 30-year fixed-rate purchase mortgages in the Community Advantage Program (CAP). Nevertheless, analysis of this sample offers unique insight into borrowers' interactions with mortgage brokers during the refinancing transaction. Origination with a mortgage broker, compared with origination through a retail lender, is associated with both a less satisfactory refinancing process and a higher likelihood of refinancing into an adjustable-rate mortgage (ARM).

Keywords: Mortgage brokers, Refinancing

Suggested Citation

Spader, Jonathan and Quercia, Roberto G., Mortgage Brokers and the Refinancing Transaction: Evidence from CRA Borrowers (September 29, 2010). Journal of Real Estate Finance and Economics, Vol. 42, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1684766

Jonathan Spader (Contact Author)

Harvard University - Joint Center for Housing Studies ( email )

1033 Massachusetts Ave, 5th Floor
Cambridge, MA 02138
United States

Roberto G. Quercia

University of North Carolina (UNC) at Chapel Hill - Department of City and Regional Planning ( email )

New East Building
Chapel Hill, NC 27599-3140
United States
919-962-4766 (Phone)
Not available (Fax)

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