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Exploring Gender and Racial Disparities in Mortgage Pricing: A Comprehensive Analysis of Risk-Based Lending Practices

Author

Listed:
  • Hongyan Liang

    (Gies College of Business, University of Illinois Urbana-Champaign, United States Author-2-Name: Zilong Liu Author-2-Workplace-Name: Gies College of Business, University of Illinois Urbana-Champaign, United States Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

" Objective - This study examines whether risk-based mortgage pricing in the U.S. is neutral with respect to borrower gender and race/ethnicity, and whether any observed pricing gaps persist after controlling for borrower credit risk and loan characteristics using a nationally representative dataset. Methodology - Using the National Survey of Mortgage Originations (NSMO) Public Use File covering originations from 2013–2020, we evaluate demographic disparities in mortgage rate spreads and default outcomes through a unified empirical framework. Specifically, we employ exact matching and propensity score matching to compare observably similar borrowers, interaction regression models to test whether standard risk factors are priced differently across demographic groups, and residual-based diagnostics to assess unexplained pricing components after conditioning on observable risk factors. Findings - Across methods, female borrowers face higher mortgage rate spreads than comparable male borrowers, despite exhibiting similar or lower observed default risk. Racial disparities are more nuanced: Black and Hispanic borrowers exhibit higher raw loan costs and higher default rates, but conditional rate-spread differences largely attenuate after controlling for observable risk factors, whereas Asian borrowers consistently receive more favorable pricing. Interaction effects indicate that the marginal pricing of key risk variables differs across demographic groups, and residual analysis highlights a persistent unexplained gender pricing component. Novelty - The paper contributes by combining a uniquely rich dataset that links borrower demographics with detailed credit quality and performance measures and by integrating matching, interaction modeling, and residual diagnostics within one unified framework to evaluate both level differences and differential marginal pricing in mortgage rates. Type of Paper - Empirical"

Suggested Citation

  • Hongyan Liang, 2026. "Exploring Gender and Racial Disparities in Mortgage Pricing: A Comprehensive Analysis of Risk-Based Lending Practices," GATR Journals gjbssr673, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:gjbssr673
    DOI: https://doi.org/10.35609/gjbssr.2026.14.1(1)
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    References listed on IDEAS

    as
    1. Neil Bhutta & Aurel Hizmo, 2021. "Do Minorities Pay More for Mortgages? [Higher-priced home lending and the 2005 HMDA data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(2), pages 763-789.
    2. James Conklin & Kristopher Gerardi & Lauren Lambie-Hanson, 2022. "Can Everyone Tap Into the Housing Piggy Bank? Racial Disparities in Access to Home Equity," FRB Atlanta Working Paper 2022-17, Federal Reserve Bank of Atlanta.
    3. Bocian, Debbie Gruenstein & Ernst, Keith S. & Li, Wei, 2008. "Race, ethnicity and subprime home loan pricing," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 110-124.
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    5. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 351-380.
    6. Deng, Yongheng & Gabriel, Stuart, 2006. "Risk-Based Pricing and the Enhancement of Mortgage Credit Availability among Underserved and Higher Credit-Risk Populations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1431-1460, September.
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    8. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    9. Robert Avery & Kenneth Brevoort & Glenn Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, Taylor & Francis Journals, vol. 29(4), pages 351-380, January.
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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