Race, Ethnicity and High-Cost Mortgage Lending

Patrick Bayer, Fernando Ferreira and Stephen Ross

No 20762, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G0 G21 R21 R3 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-ban and nep-ure
Note: AP PE
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Citations: View citations in EconPapers (13)

Published as What Drives Racial and Ethnic Differences in High-Cost Mortgages? The Role of High-Risk Lenders Patrick Bayer Fernando Ferreira Stephen L. Ross The Review of Financial Studies, Volume 31, Issue 1, 1 January 2018, Pages 175–205, https://doi.org/10.1093/rfs/hhx035

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