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

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Author Info
Robert F. Phillips () (Department of Economics The George Washington University Washington, D.C. 20052)
Anthony M.J. Yezer () (Department of Economics The George Washington University Washington, D.C. 20052)

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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.

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File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol11n01/v11p087.pdf
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Publisher Info
Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 11 (1996)
Issue (Month): 1 ()
Pages: 87-102
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Handle: RePEc:jre:issued:v:11:n:1:1996:p:87-102

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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Find related papers by JEL classification:
L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. William C. Hunter & Mary Beth Walker, 1995. "The cultural affinity hypothesis and mortgage lending decisions," Working Paper Series, Issues in Financial Regulation 95-8, Federal Reserve Bank of Chicago.
  2. Meng, Chun-Lo & Schmidt, Peter, 1985. "On the Cost of Partial Observability in the Bivariate Probit Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 71-85, February. [Downloadable!] (restricted)
  3. Berkovec, James A, et al, 1994. "Race, Redlining, and Residential Mortgage Loan Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 263-94, November.
  4. Ferguson, Michael F & Peters, Stephen R, 1995. " What Constitutes Evidence of Discrimination in Lending?," Journal of Finance, American Finance Association, vol. 50(2), pages 739-48, June. [Downloadable!] (restricted)
  5. Yezer, Anthony M J & Phillips, Robert F & Trost, Robert P, 1994. "Bias in Estimates of Discrimination and Default in Mortgage Lending: The Effects of Simultaneity and Self-Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 197-215, November.
    Other versions:
  6. Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston. [Downloadable!]
    Other versions:
  7. James A. Berkovec & Glenn B. Canner & Stuart A. Gabriel & Timothy H. Hannan, 1994. "Race, redlining, and residential mortgage loan performance," Proceedings, Federal Reserve Bank of Philadelphia, pages 263-298.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael LaCour-Little, 2007. "Economic Factors Affecting Home Mortgage Disclosure Act Reporting," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 479-510. [Downloadable!]
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