The Price of Subprime Mortgages at Mortgage Brokers and Lender
Bibliographic record
Abstract
This paper examines pricing of subprime first mortgages by brokers and lenders using data on loans in originated between the first quarter of 1998 to the first quarter of 2006 at seven large subprime mortgage lenders. The results provide little evidence that most consumers obtaining mortgages through brokers pay higher prices than consumers obtaining mortgages directly from lenders. We first estimate a model explaining price using data on the loans originated directly by lenders (lender model). We predict annual percentage rates for broker-originated loans using the lender model and compare actual annual percentage rates for the broker-originated loans with the predicted rates. For five of six mortgage products, half or more of customers obtaining first mortgages through brokers paid less than we estimate they would have paid if they obtained the loan directly from the lender. For the sixth product, which accounted for a small percentage of all broker originations, 45.5 percent of loans had an annual percentage rate that was less that predicted by the lender model. This finding does not support the hypothesis that brokers generally steer customers into more costly than those they could obtain from lenders. We then repeat the process by estimating a model explaining price as a function of loan terms and borrower characteristics using the data on loans originated through brokers (broker model). Using this model to predict annual percentage rates on loans originated directly with lenders, we compare the actual annual percentage rate with the predicted annual percentage from the broker model. If brokers steer borrowers to higher priced products, we would expect actual rates for lender originations to be less than predicted rates from the broker model. Four of six products accounting for 85.4 percent of lenders mortgage originations, had annual percentage rates that were greater than the rates predicted by the broker model. Large percentages of originations for the other two products has actual rates that were larger that the annual percentage rates predicted by the broker model. Overall, most customers obtaining loans directly from the lender paid more than they would have paid had they obtained the loan through a broker.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.013 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.002 | 0.002 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.006 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".