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Race, Ethnicity and High Cost Mortgage Lending

Listed author(s):
  • Patrick Bayer

    (Duke University)

  • Fernando Ferreira

    (University of Pennsylvania)

  • Stephen L. Ross

    (University of Connecticut)

This paper examines how high cost mortgage lending varies by race and ethnicity. It uses a unique panel data that matches a representative sample of mortgages in seven large metropolitan markets between 2004 and 2008 to public records of housing transactions and proprietary credit reporting data. The results reveal a significantly higher incidence of high costs loans for African-American and Hispanic borrowers even after controlling for key mortgage risk factors: they have a 7.7 and 6.2 percentage point higher likelihood of a high cost loan, respectively, in the home purchase market relative to an overall incidence of 14.8 percent among all home purchase mortgages. Significant racial and ethnic differences are widespread throughout the market – they are present (i) in each metro area, (ii) across high and low risk borrowers, and (iii) regardless of the age of the borrower. These differences are reduced by 60 percent with the inclusion of lender fixed effects, implying that a significant portion of the estimated market-wide racial differences can be attributed to differential access to (or sorting across) mortgage lenders.

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File URL: http://web2.uconn.edu/economics/working/2014-36.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2014-36.

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Length: 36 pages
Date of creation: Dec 2014
Handle: RePEc:uct:uconnp:2014-36
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University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063

Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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