IDEAS home Printed from https://ideas.repec.org/a/mir/mirbus/v2y2012i5p8-19.html
   My bibliography  Save this article

Minimizing predatory lending: Designing a long-term compensation structure to minimize the actions of opportunistic mortgage brokers

Author

Listed:
  • Patrick Payne

    (Texas Tech University)

  • Tammy Huffman Ph.D

    (Utah Valley University)

Abstract

This paper addresses the inadequacies in the current compensation structure for mortgage brokers, and asserts that the resulting opportunistic behavior by brokers played a major role in the 2008 collapse of the mortgage market. We utilize agency theory as an underpinning to suggest that increased regulation will have only a limited impact on self-serving behavior due to the complex information asymmetries possessed by brokers. We posit that a restructured long-term compensation package would be effective in aligning the interests of borrowers and brokers, ultimately reducing the level of mortgage defaults and foreclosures.

Suggested Citation

  • Patrick Payne & Tammy Huffman Ph.D, 2012. "Minimizing predatory lending: Designing a long-term compensation structure to minimize the actions of opportunistic mortgage brokers," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(5), pages 8-19, October.
    • Handle: RePEc:mir:mirbus:v:2:y:2012:i:5:p:8-19
    as

    Download full text from publisher

    File URL: http://thejournalofbusiness.org/index.php/site/article/view/95/94
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jean Jinghan Chen & Haitao Zhang & Xinrong Xiao & Weian Li, 2011. "Financial crisis and executive remuneration in banking industry - an analysis of five British banks," Applied Financial Economics, Taylor & Francis Journals, vol. 21(23), pages 1779-1791.
    2. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    3. Gerald Lander & Katherine Barker & Margarita Zabelina & Tiffany Williams, 2009. "Subprime Mortgage Tremors: An International Issue," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(1), pages 1-16, February.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Antje Berndt & Burton Hollifield & Patrik Sandås, 2010. "The Role of Mortgage Brokers in the Subprime Crisis," NBER Working Papers 16175, National Bureau of Economic Research, Inc.
    6. Bond, Philip & Musto, David K. & Yilmaz, Bilge, 2009. "Predatory mortgage lending," Journal of Financial Economics, Elsevier, vol. 94(3), pages 412-427, December.
    7. repec:kap:iaecre:v:15:y:2009:i:1:p:1-16 is not listed on IDEAS
    8. Andrew Hertzberg & Jose Maria Liberti & Daniel Paravisini, 2010. "Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation," Journal of Finance, American Finance Association, vol. 65(3), pages 795-828, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patrick Payne & Tammy Huffman Ph.D, 2012. "Minimizing predatory lending: Designing a long-term compensation structure to minimize the actions of opportunistic mortgage brokers," International Journal of Business and Social Research, LAR Center Press, vol. 2(5), pages 8-19, October.
    2. Shah, Syed Zulfiqar Ali & Akbar, Saeed & Liu, Jia & Liu, Ziyu & Cao, Sichen, 2017. "CEO compensation and banks’ risk-taking during pre and post financial crisis periods," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1489-1503.
    3. Baarda, James R., 2003. "Current Law & Economics Debates: Tools for Assessing Fundamental Cooperative Changes?," 2003 Annual Meeting, October 29 31802, NCERA-194 Research on Cooperatives.
    4. Preet Singh & Chitra Singla, 2016. "Executive Stock Options: Will it Work as a Good Governance Mechanism in all Scenarios?," Working Papers id:10985, eSocialSciences.
    5. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    6. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. J. David Cummins & Mary A. Weiss & Hongmin Zi, 1998. "Organizational Form and Efficiency: An Analysis of Stock and Mutual Property-Liability Insurers," Center for Financial Institutions Working Papers 97-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
    8. Mei, Maggie Qiuzhu & Wang, Le & Yan, Jie, 2023. "Maintaining product quality consistency when offshoring to emerging markets: The role of subsidiary control," Journal of International Management, Elsevier, vol. 29(1).
    9. Brogi, Marina & Lagasio, Valentina, 2022. "Better safe than sorry. Bank corporate governance, risk-taking, and performance," Finance Research Letters, Elsevier, vol. 44(C).
    10. Isabelle Le Breton–Miller & Danny Miller, 2006. "Why Do Some Family Businesses Out–Compete? Governance, Long–Term Orientations, and Sustainable Capability," Entrepreneurship Theory and Practice, , vol. 30(6), pages 731-746, November.
    11. Emil Inauen & Katja Rost & Margit Osterloh & Bruno S. Frey, 2010. "Back to the Future –A Monastic Perspective on Corporate Governance," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 21(1), pages 38-59.
    12. Salazar Idana & Galve Górriz Carmen, 2011. "Determinants of the Differences in the Downstream Vertical Integration and Efficiency Implications in Agricultural Cooperatives," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-26, February.
    13. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, vol. 23(1), pages 1-27, February.
    14. Christian Weiss & Stefan Hilger, 2012. "Ownership concentration beyond good and evil: is there an effect on corporate performance?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(4), pages 727-752, November.
    15. Ayman Hassan Bazhair & Mohammed Naif Alshareef, 2022. "Dynamic relationship between ownership structure and financial performance: a Saudi experience," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2098636-209, December.
    16. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
    17. Hwang, Seokyoun & Sarath, Bharat & Han, Seung-youb, 2022. "Auditor independence: The effect of auditors’ quality control efforts and corporate governance," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    18. Cheng-Wen Lee & Hsiao Chuan Chen & Choong Leng Peng & Shu Hui Chen, 2023. "Sustainability of Taiwanese SME Family Businesses in the Succession Decision-Making Agenda," Sustainability, MDPI, vol. 15(2), pages 1-21, January.
    19. González-Díaz, Manuel & Montoro-Sánchez, Ángeles, 2011. "Some lessons from incentive theory: Promoting quality in bus transport," Transport Policy, Elsevier, vol. 18(2), pages 299-306, March.
    20. Maug, Ernst, 1997. "Boards of directors and capital structure: Alternative forms of corporate restructuring," Journal of Corporate Finance, Elsevier, vol. 3(2), pages 113-139, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mir:mirbus:v:2:y:2012:i:5:p:8-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: M Kabir (email available below). General contact details of provider: https://edirc.repec.org/data/csmirus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.