TY  - JOUR
AU  - Kleiner, Morris M
AU  - Todd, Richard M
TI  - Mortgage Broker Regulations That Matter: Analyzing Earnings, Employment, and Outcomes for Consumers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13684
PY  - 2007
Y2  - December 2007
DO  - 10.3386/w13684
UR  - http://www.nber.org/papers/w13684
L1  - http://www.nber.org/papers/w13684.pdf
N1  - Author contact info:
Morris M. Kleiner
University of Minnesota
Humphrey School of Public Affairs
260 Humphrey Center
301 19th Street South
Minneapolis, MN  55455
Tel: 612/625-2089
Fax: 612/625-6351
E-Mail: kleiner@umn.edu

Richard Todd
Federal Reserve Bank of Minneapolis
E-Mail: dick.todd@mpls.frb.org
M1  - 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)

M3  - presented at "Labor Market Intermediation Conf.", May 17-18, 2007
AB  - As 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.
ER  -