Can Everyone Tap Into the Housing Piggy Bank? Racial Disparities in Access to Home Equity

James Conklin, Kristopher Gerardi and Lauren Lambie-Hanson

No 2022-17, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: An oft-touted benefit of homeownership is the ability to build and access equity, and in recent years the amount of “tappable” home equity held by US homeowners has reached historic levels. But more than one-quarter of recent applications for mortgage equity withdrawal (MEW) loan products were denied. Black and Hispanic homeowners’ applications were denied at even higher rates: 44 percent and 32 percent, respectively. These racial disparities in denials are larger than those associated with purchase and rate/term refinance mortgage applications. Controlling for loan and borrower characteristics commonly used in the underwriting process significantly reduces the MEW disparities, with the Black-White denial rate gap falling by approximately 83 percent, and the Hispanic-White gap falling by 73 percent. In other words, seemingly race-neutral underwriting criteria in the MEW product space explain large differences in the extent to which minority homeowners can access their home equity.

Keywords: housing wealth; mortgage; home equity; racial disparities (search for similar items in EconPapers)
JEL-codes: G21 G51 J15 (search for similar items in EconPapers)
Pages: 56
Date: 2022-11-22
New Economics Papers: this item is included in nep-ban and nep-ure
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Published in 2022

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Working Paper: Can Everyone Tap into the Housing Piggy Bank? Racial Disparities in Access to Home Equity (2023)
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DOI: 10.29338/wp2022-17

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