Mortgage Brokers and the Effectiveness of Regulatory Oversights

42 Pages Posted: 29 Apr 2019

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison

Yonglin Wang

Lingnan University

Date Written: March 25, 2019

Abstract

This paper studies the heterogeneous responses among different types of mortgage brokers to the consolidated occupational licensing regulations. We explicitly account for the heterogeneities between sole brokers and corporate brokers. Our findings suggest that sole brokers respond to the reinforced regulatory oversights by applying a more stringent screening process in loan originations based on soft information, hence achieve better subsequent loan performances. In contrast, we find no regulatory effect on corporate brokers. The agency problem among sole brokers can be mitigated by consolidated financial requirement for occupational licensing. However, such provision turns out to be ineffective in governing corporate brokers.

Keywords: mortgage brokers, occupational licensing regulations, soft information, loan performance

JEL Classification: G21, G24, J44

Suggested Citation

Agarwal, Sumit and Deng, Yongheng and Wang, Yonglin, Mortgage Brokers and the Effectiveness of Regulatory Oversights (March 25, 2019). Available at SSRN: https://ssrn.com/abstract=3368063 or http://dx.doi.org/10.2139/ssrn.3368063

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison ( email )

4110 Grainger Hall
975 University Avenue
Madison, WI 53706
United States
+1 (608) 262-4865 (Phone)

HOME PAGE: http://https://bus.wisc.edu/faculty/yongheng-deng

Yonglin Wang (Contact Author)

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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