Mortgage Brokers, Origination Fees, and Competition
36 Pages Posted: 26 Mar 2012 Last revised: 27 Sep 2012
Date Written: March 26, 2012
This paper examines the relation between mortgage origination fees and mortgage broker competition. A reverse first-price sealed-bid auction model is used to motivate pricing behavior by brokers. Confirming the model predictions, our empirical analysis shows that increased mortgage brokerage competition at the Metropolitan Statistical Area level leads to lower origination fees. The findings are robust to different measures of fees as well as different measures of competition. We also provide evidence that broker competition reduces mortgage origination fees on retail (non-brokered) loans as well. Our results suggest that mortgage brokers increase competition and lower fees in the mortgage market.
Keywords: Mortgage Brokerage, Competition, Subprime, Cost
JEL Classification: G2
Suggested Citation: Suggested Citation