Self-Selection and Tests for Bias and Risk in Mortgage Lending: Can You Price the Mortgage If You Don't Know the Process?

Robert F. Phillips () and Anthony M.J. Yezer ()
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Anthony M.J. Yezer: Department of Economics The George Washington University Washington, D.C. 20052, http://www.hfni.gsehd.gwu.edu/~econ/

Journal of Real Estate Research, 1996, vol. 11, issue 1, pages 87-102

Abstract: There is increasing interest in understanding the determinants of mortgage rejection by lenders and default by borrowers. Although many researchers have proposed simple single-equation models of rejection and default, we argue that far more complex econometric specifications are needed. This paper focuses attention on problems of sample selection in the process creating a sample of applicants for conventional mortgages. We illustrate that corrections for sample selection bias may have a substantial effect on estimation results and hence should not be ignored in studies of mortgage rejection or default.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1996
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