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Who defaults on their home mortgage?

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  • Doviak, Eric
  • MacDonald, Sean

Abstract

Since February 2010, detailed information on every home mortgage default and foreclosure in New York State must be filed with the New York State Banking Department (NYSBD). Pairing the NYSBD's data with data on originations from the Home Mortgage Disclosure Act (HMDA) enables us to identify the race and ethnicity of borrowers who defaulted on their home mortgages (in New York State). Like many previous studies, we find strong racial and ethnic disparities in lending practices, but we do not find conclusive evidence that HMDA-measurable forms of discrimination increased a borrower's probability of default. After controlling for other factors, we find that the interest rates charged to black and Latino borrowers tended to be higher than the ones charged to their white and non-Latino counterparts. This may be one reason why blacks and Latinos tend to default at a higher rate, but other factors, such as the tendency of black and Latino borrowers to take out larger loans than their white and non-Latino counterparts, may also have contributed to the higher default rate among black and Latino borrowers.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34275.

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Date of creation: 24 Sep 2011
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Handle: RePEc:pra:mprapa:34275

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Keywords: mortgage; default; foreclosure; discrimination;

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  1. Lee C. Adkins, 2009. "An Instrumental Variables Probit Estimator Using Gretl," EHUCHAPS, Universidad del País Vasco - Facultad de Ciencias Económicas y Empresariales, Universidad del País Vasco - Facultad de Ciencias Económicas y Empresariales.
  2. Elizabeth Laderman, 2001. "Subprime mortgage lending and the capital markets," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue dec28.
  3. Doviak, Eric & MacDonald, Sean, 2011. "Who enters the foreclosure process?," MPRA Paper, University Library of Munich, Germany 34276, University Library of Munich, Germany.
  4. Gerardi Kristopher & Willen Paul, 2009. "Subprime Mortgages, Foreclosures, and Urban Neighborhoods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 9(3), pages 1-37, March.
  5. Mark Doms & Fred Furlong & John Krainer, 2007. "Subprime mortgage delinquency rates," Working Paper Series, Federal Reserve Bank of San Francisco 2007-33, Federal Reserve Bank of San Francisco.
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Cited by:
  1. Chan, Sewin & Gedal, Michael & Been, Vicki & Haughwout, Andrew, 2011. "The role of neighborhood characteristics in mortgage default risk: evidence from New York City," MPRA Paper, University Library of Munich, Germany 33941, University Library of Munich, Germany.
  2. Doviak, Eric & MacDonald, Sean, 2011. "Who enters the foreclosure process?," MPRA Paper, University Library of Munich, Germany 34276, University Library of Munich, Germany.

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