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Licentious Behavior - In Brief

June 1, 2008


Douglas Clement Editor, The Region
Licentious Behavior - In Brief

Less license?

  • Tighter regulation of mortgage brokers has been proposed by many as a means of preventing future subprime mortgage problems.

  • But a recent econometric assessment of mortgage broker licensing and market outcomes in the United States indicates that most regulatory steps have no clear connection to consumer outcomes; one financial regulation (surety bond and minimum net worth requirements) is related to conditions that seem worse for both brokers and borrowers.

  • While recognizing that their statistical analysis demonstrates only correlation, not causality, the researchers call for “a cautious approach to imposing additional restrictions” on entry into the mortgage broker business [emphasis added].

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Douglas Clement
Editor, The Region

Douglas Clement was a managing editor at the Minneapolis Fed, where he wrote about research conducted by economists and other scholars associated with the Minneapolis Fed and interviewed prominent economists.