Review of Financial Studies Vol. 38 No. 11 2025
The Role of Intermediaries in Selection Markets: Evidence from Mortgage Lending
Abstract
We study the role of brokers in selection markets. We find broker-clients in the Canadian mortgage market are observationally different from branch-clients. They finance larger loans with more leverage and longer amortization. We build and estimate a model of mortgage demand to disentangle three possible explanations for these riskier product choices: (1) selection on observables, (2) unobserved borrower preferences for riskier loans, and (3) a causal effect of brokers. Although we find that brokers influence product choices, the main reason borrowers choose high-leverage products is unobserved preferences. Borrowers prefer larger loans and brokers facilitate qualification for them.
- DOI
- 10.1093/rfs/hhae075
- Volume
- 38
- Issue
- 11
- Pages
- 3284-3328
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref