Treasury Secretary Henry Paulson Jr. has announced plans to establish stringent national licensing standards for mortgage brokers. This is not a good idea.

The relationship between licensure in various professions and the quality of service is ambiguous at best. In the specific case of mortgage brokers, a comparison of states that license mortgage brokers and those that don’t suggests that national licensure could lead to more foreclosures, not less.

Morris Kleiner of the University of Minnesota and Richard Todd, a vice president at the Federal Reserve Bank of Minneapolis, examined mortgage-broker licensing requirements in the 50 states and District of Columbia between 1996 and 2006. They found no significant relationship between licensing requirements and subsequent outcomes in the housing market, with one exception.