Pricing Power in the Mortgage Market: Evidence from GSE Fee Waivers

Neil Bhutta, Benjamin Keys and Adithya Raajkumar

No 35907, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Market power may arise not only from firms, but also from individual salespeople who can exploit informational advantages over consumers. We explore this phenomenon in the mortgage market by examining a Fannie Mae/Freddie Mac fee waiver targeted at lower-income first-time homebuyers. We estimate that mortgage intermediaries capture over 60% of $1.5 billion in total fee waivers during 2023–2024, rather than fully passing these savings through to borrowers. Pass-through varies substantially across loan officers: those with a track record of originating expensive mortgages (independent of lender pricing) pass through less than 20% of the waiver. Our evidence suggests that loan officers retain incentives to steer borrowers into higher-rate mortgages, despite post-crisis regulations designed to limit such practices.

JEL-codes: D14 G18 G21 G51 (search for similar items in EconPapers)
Date: 2026-10
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