Mortgage Brokers and the Effectiveness of Regulatory Oversights
42 Pages Posted: 29 Apr 2019
Date Written: March 25, 2019
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: Suggested Citation