Mortgage Broker Regulations That Matter: Analyzing Earnings, Employment, and Outcomes for Consumers
AbstractAs the role of mortgage brokers in mortgage origination grew from insignificant in the 1980s to dominant in recent years, questions have arisen about whether its services help or harm consumers. In response, states have increasingly regulated the business, largely by creating and tightening occupational licensing requirements for mortgage brokers. The question of whether increased occupational licensing of mortgage brokers improves consumer outcomes is theoretically ambiguous and has been little studied empirically. This study introduces a new database of mortgage broker licensing requirements and assesses the relationships between these requirements and outcomes in both the labor market for brokers and the consumer market for mortgages. We find that one typical regulation—the requirement in many states that mortgage brokers maintain a surety bond or minimum net worth—has a significant and fairly consistent statistical relationship with both labor and consumer market outcomes. In particular, we find that tighter bonding/net worth requirements are associated with slightly higher broker earnings, fewer brokers, fewer subprime mortgages, higher foreclosure rates, and a greater percentage of high-interest-rate mortgages. Although we do not provide a full causal interpretation of these results, we take seriously the possibility that restrictive bonding requirements for mortgage brokers have unintended negative consequences for many consumers. On balance, our results also seem to support the relevance of theories of occupational licensing that stress the importance of financial entry and exit barriers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13684.
Date of creation: Dec 2007
Date of revision:
Publication status: published as Morris M. Kleiner, Richard M. Todd. "Mortgage Broker Regulations That Matter: Analyzing Earnings, Employment, and Outcomes for Consumers," in David H. Autor, editor, "Studies of Labor Market Intermediation " University of Chicago Press (2009)
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
- J4 - Labor and Demographic Economics - - Particular Labor Markets
- J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
- J8 - Labor and Demographic Economics - - Labor Standards
- K2 - Law and Economics - - Regulation and Business Law
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-LAB-2008-01-05 (Labour Economics)
- NEP-REG-2008-01-05 (Regulation)
- NEP-URE-2008-01-05 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shepard, Lawrence, 1978. "Licensing Restrictions and the Cost of Dental Care," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 187-201, April.
- Jack Guttentag, . "Another View of Predatory Lending," Zell/Lurie Center Working Papers 380, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Walter Garcia-Fontes & Hugo Hopenhayn, 2000.
"Entry restrictions and the determination of quality,"
Spanish Economic Review,
Springer, vol. 2(2), pages 105-127.
- Walter Garcia Fontes & Hugo Hopenhayn, 1992. "Entry restrictions and the determination of quality," Economics Working Papers 10, Department of Economics and Business, Universitat Pompeu Fabra.
- Morris M. Kleiner & Alan B. Krueger, 2008.
"The Prevalence and Effects of Occupational Licensing,"
1069, Princeton University, Department of Economics, Industrial Relations Section..
- Morris M. Kleiner & Alan B. Krueger, 2010. "The Prevalence and Effects of Occupational Licensing," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 676-687, December.
- Alan B. Krueger & Morris M. Kleiner, 2008. "The Prevalence and Effects of Occupational Licensing," Working Papers 1092, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Morris M. Kleiner & Alan B. Krueger, 2008. "The Prevalence and Effects of Occupational Licensing," NBER Working Papers 14308, National Bureau of Economic Research, Inc.
- Kleiner, Morris M. & Krueger, Alan B., 2008. "The Prevalence and Effects of Occupational Licensing," IZA Discussion Papers 3675, Institute for the Study of Labor (IZA).
- Kleiner, Morris M & Kudrle, Robert T, 2000. "Does Regulation Affect Economic Outcomes? The Case of Dentistry," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 547-82, October.
- Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 843-62, October.
- Law, Marc T. & Kim, Sukkoo, 2005.
"Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation,"
The Journal of Economic History,
Cambridge University Press, vol. 65(03), pages 723-756, September.
- Marc T. Law & Sukkoo Kim, 2004. "Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation," NBER Working Papers 10467, National Bureau of Economic Research, Inc.
- Bostic, Raphael W. & Engel, Kathleen C. & McCoy, Patricia A. & Pennington-Cross, Anthony & Wachter, Susan M., 2008. "State and local anti-predatory lending laws: The effect of legal enforcement mechanisms," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 47-66.
- Kristopher Gerardi & Harvey S. Rosen & Paul Willen, 2006.
"Do households benefit from financial deregulation and innovation?: the case of the mortgage market,"
Public Policy Discussion Paper
06-6, Federal Reserve Bank of Boston.
- Kristopher Gerardi & Harvey S. Rosen & Paul Willen, 2007. "Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market," NBER Working Papers 12967, National Bureau of Economic Research, Inc.
- Karen M. Pence, 2003. "Foreclosing on opportunity: state laws and mortgage credit," Finance and Economics Discussion Series 2003-16, Board of Governors of the Federal Reserve System (U.S.).
- William P. Rogerson, 1983. "Reputation and Product Quality," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 508-516, Autumn.
- Cynthia J. Pahl, 2007. "A compilation of state mortgage broker laws and regulations, 1996-2006," Community Affairs Report 2007-2, Federal Reserve Bank of Minneapolis.
- Kandel, E. & Lazear, E.P., 1990.
"Peer Pressure and Partnerships,"
90-07, Rochester, Business - Managerial Economics Research Center.
- Michael LaCour-Little, 2007. "Economic Factors Affecting Home Mortgage Disclosure Act Reporting," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 479-510.
- David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
- William P. Alexander & Scott D. Grimshaw & Grant R. McQueen & Barrett A. Slade, 2002. "Some Loans Are More Equal than Others: Third-Party Originations and Defaults in the Subprime Mortgage Industry," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 667-697.
- Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
- Michael LaCour-Little, 2009. "The Pricing of Mortgages by Brokers: An Agency Problem?," Journal of Real Estate Research, American Real Estate Society, vol. 31(2), pages 235-264.
- Francisca Richter, 2008. "An analysis of foreclosure rate differentials in soft markets," Working Paper 0811, Federal Reserve Bank of Cleveland.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.