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The Vulnerability of Minority Homeowners in the Housing Boom and Bust

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  • Patrick Bayer
  • Fernando Ferreira
  • Stephen L. Ross

Abstract

This paper examines mortgage outcomes for a large, representative sample of individual home purchases and refinances linked to credit scores in seven major US markets in the recent housing boom and bust. Among those with similar credit scores, black and Hispanic homeowners had much higher rates of delinquency and default in the downturn. These differences are not readily explained by the likelihood of receiving a subprime loan or by differential exposure to local shocks in the housing and labor market and are especially pronounced for loans originated near the peak of the boom. Our findings suggest that those black and Hispanic homeowners drawn into the market near the peak were especially vulnerable to adverse economic shocks and raise serious concerns about homeownership as a mechanism for reducing racial disparities in wealth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19020.

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Date of creation: May 2013
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Handle: RePEc:nbr:nberwo:19020

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  1. Duca, John V. & Rosenthal, Stuart S., 1994. "Borrowing constraints and access to owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 24(3), pages 301-322, June.
  2. Hilary Hoynes & Douglas L. Miller & Jessamyn Schaller, 2012. "Who Suffers during Recessions?," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 27-48, Summer.
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  6. Christopher J. Mayer & Karen Pence, 2008. "Subprime Mortgages: What, Where, and to Whom?," NBER Working Papers 14083, National Bureau of Economic Research, Inc.
  7. Roberto G. Quercia & George W. McCarthy & Susan M. Wachter, . "The Impacts Of Affordable Lending Efforts On Homeownership Rates," Zell/Lurie Center Working Papers 405, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
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  9. Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2008. "Negative equity and foreclosure: theory and evidence," Public Policy Discussion Paper 08-3, Federal Reserve Bank of Boston.
  10. Joseph Gyourko & Joseph Tracy, 2013. "Unemloyment and Unobserved Credit Risk in the FHA Single Family Mortgage Insurance Fund," NBER Working Papers 18880, National Bureau of Economic Research, Inc.
  11. Andrew Haughwout & Donghoon Lee & Joseph Tracy & Wilbert van der Klaauw, 2011. "Real estate investors, the leverage cycle, and the housing market crisis," Staff Reports 514, Federal Reserve Bank of New York.
  12. Marsha J. Courchane, 2007. "The Pricing of Home Mortgage Loans to Minority Borrowers: How Much of the APR Differential Can We Explain?," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 399-440.
  13. Terrell, Henry S, 1971. "Wealth Accumulation of Black and White Families: The Empirical Evidence," Journal of Finance, American Finance Association, vol. 26(2), pages 363-77, May.
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  15. Engelhardt, Gary V, 1996. "Consumption, Down Payments, and Liquidity Constraints," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 255-71, May.
  16. Chris Mayer & Karen Pence, 2008. "Subprime mortgages: what, where, and to whom?," Finance and Economics Discussion Series 2008-29, Board of Governors of the Federal Reserve System (U.S.).
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  1. Why so much policy focus on home ownership?
    by Economic Logician in Economic Logic on 2013-05-31 14:54:00

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