Topic:The Effect of Mortgage Broker Licensing On Loan Origination Standards and Defaults under the Originate-to-Distribute Model: Evidence from the U.S. Mortgage Market

Speaker:Lan Shi (//works.bepress.com/lan_shi/)

Affiliation:University of Washington

Time：2:00-3:30pm, Tuesday, March 12

Location：Room 217, Guanghua New Building

Abstract.By exploiting state-level variations, we examine whether stricter licensing requirements for loan brokers raise lending standards and consequently improve loan performances. Using data on private label securitized loans, we find that the requirements on registration, surety bonds, net worth, work experience, education, exam, and continuing education are all effective in raising loan origination standards. Requirements placed on employees are as effective as those on licensees. The effect is larger for subprime, low/no-doc, cash-out-refinance loans, and high-minority neighborhoods. These findings point to the value of broker regulation when lenders' incentives to screen are compromised under the originate-to-distribute model.

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