Differences in subprime loan pricing across races and neighborhoods

Andra Ghent, Ruben Hernandez-Murillo and Michael Owyang

Regional Science and Urban Economics, 2014, vol. 48, issue C, 199-215

Abstract: We investigate whether race and ethnicity influenced subprime loan pricing during 2005, the peak of the subprime mortgage expansion. We combine loan-level data on the performance of non-prime securitized mortgages with individual- and neighborhood-level data on racial and ethnic characteristics for metropolitan areas in California and Florida. Using a model of rate determination that accounts for predicted loan performance, we evaluate the differences in subprime mortgage rates in terms of racial and ethnic groups and neighborhood characteristics. We find evidence of adverse pricing for Blacks and Hispanics. The evidence of adverse pricing is strongest for purchase mortgages and mortgages originated by non-depository institutions.

Keywords: Fair Housing Act; Subprime mortgages; Loan performance; Discrimination (search for similar items in EconPapers)
JEL-codes: C11 G21 J15 R23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Related works:
Working Paper: Differences in subprime loan pricing across races and neighborhoods (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:48:y:2014:i:c:p:199-215

DOI: 10.1016/j.regsciurbeco.2014.07.006

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