Race, Ethnicity and High Cost Mortgage Lending

Patrick Bayer, Francisco Ferreira and Stephen Ross

No 2014-023, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: This paper examines how high cost mortgage lending varies by race and ethnicity. It uses a unique panel data that matches a representative sample of mortgages in seven large metropolitan markets between 2004 and 2008 to public records of housing transactions and proprietary credit reporting data. The results reveal a significantly higher incidence of high costs loans for African-American and Hispanic borrowers even after controlling for key mortgage risk factors: they have a 7.7 and 6.2 percentage-point-higher likelihood of a high cost loan, respectively, in the home purchase market relative to an overall incidence of 14.8 percent among all home purchase mortgages. Significant racial and ethnic differences are widespread throughout the market – they are present (i) in each metro area, (ii) across high and low risk borrowers, and (iii) regardless of the age of the borrower. These differences are reduced by 60 percent with the inclusion of lender fixed effects, implying that a significant portion of the estimated market-wide racial differences can be attributed to differential access to (or sorting across) mortgage lenders.

Keywords: mortgage; cost of credit; race; ethnicity; subprime; credit score; neighborhood (search for similar items in EconPapers)
JEL-codes: G21 I28 J15 J71 R21 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-ban
Note: MIP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Bayer_ ... ace-eth-mortgage.pdf First version, December 2014 (application/pdf)

Related works:
Working Paper: Race, Ethnicity and High-Cost Mortgage Lending (2014)
Working Paper: Race, Ethnicity and High Cost Mortgage Lending (2014)
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