Differences in subprime loan pricing across races and neighborhoods
AbstractWe 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.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2011-033.
Length: 55 pages
Date of creation: 2011
Date of revision: 05 Mar 2014
Note: Originally submitted as “Race, Redlining, and Subprime Loan Pricing.”
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