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

Robert Phillips and Anthony Yezer

Journal of Real Estate Research, 1996, vol. 11, issue 1, 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.

Date: 1996
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Journal Article: Self-Selection and Tests for Bias and Risk in Mortgage Lending: Can You Price the Mortgage If You Don't Know the Process? (1996)
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DOI: 10.1080/10835547.1996.12090812

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