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Publication Date

February 2011


Jonathan Spader, Roberto G. Quercia


Ford Foundation

An analysis of low- and moderate-income borrowers with 30-year-fixed rate mortgages who refinanced using a mortgage broker instead of a retail lender showed a higher likelihood of refinancing into an adjustable-rate mortgage.

This study adds to the emerging literature on the lending practices of mortgage brokers during the run-up in home prices prior to 2006.

Following a sample of low- and moderate-income borrowers through the first years following home purchase, the analysis identifies differences in the refinancing transaction associated with the use of mortgage brokers vs. retail lenders.

Specifically, the analysis includes measures of the refinancing process, including whether the lender initiated contact with the borrower, whether the terms of the mortgage changed at closing, and the level of borrower satisfaction in hindsight.

Care must be taken in extrapolating from this sample to the broader mortgage market, as all borrowers refinanced out of 30-year fixed-rate purchase mortgages in the Community Advantage Program (CAP). Nevertheless, analysis of this sample offers unique insight into borrowers’ interactions with mortgage brokers during the refinancing transaction.

Origination with a mortgage broker, compared with origination through a retail lender, is associated with both a less satisfactory refinancing process and a higher likelihood of refinancing into an adjustable-rate mortgage (ARM).


Topics(s): Affordable Homeownership, Community Advantage Program, Default, Bankruptcy, & Foreclosure, Mortgage Finance, Other