Premium
How Subprime Borrowers and Mortgage Brokers Shared the Pie
Author(s) -
Berndt Antje,
Hollifield Burton,
Sandås Patrik
Publication year - 2015
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12087
Subject(s) - valuation (finance) , mortgage underwriting , shared appreciation mortgage , quantile , distribution (mathematics) , economics , business , econometrics , monetary economics , mortgage insurance , actuarial science , finance , mathematics , mathematical analysis , casualty insurance , insurance policy
We develop an equilibrium model for origination fees charged by mortgage brokers and show how the equilibrium fee distribution depends on borrowers' valuation for their loans and their information about fees. We use noncrossing quantile regressions and data from a large subprime lender to estimate conditional fee distributions. Given the fee distribution, we identify the distributions of borrower valuations and informedness. The level of informedness is higher for larger loans and in better educated neighborhoods. We quantify the fraction of the surplus from the mortgage that goes to the broker, and how it decreases as the borrower becomes more informed.