Mortgage Brokers, Origination Fees, and Competition

36 Pages Posted: 26 Mar 2012 Last revised: 27 Sep 2012

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University

James Conklin

Pennsylvania State University

Date Written: March 26, 2012

Abstract

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

Ambrose, Brent W. and Conklin, James, Mortgage Brokers, Origination Fees, and Competition (March 26, 2012). Available at SSRN: https://ssrn.com/abstract=2029007 or http://dx.doi.org/10.2139/ssrn.2029007

Brent W. Ambrose (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

James Conklin

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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