IDEAS home Printed from https://ideas.repec.org/p/uct/uconnp/2018-14.html
   My bibliography  Save this paper

Evidence and Actions on Mortgage Market Disparities: Research, Fair lending Enforcement and Consumer Protection

Author

Listed:
  • Marsha J. Courchane

    (CRA International)

  • Stephen L. Ross

    (University of Connecticut)

Abstract

In this article, we present overviews of the research on discrimination in mortgage underwriting and pricing, the experiences of minority borrowers prior to and during the financial crisis and federal efforts to mitigate foreclosures during the crisis. We next discuss the history of legal cases alleging disparate treatment of minority borrowers, and recent cases alleging disparate impact in the wake of the Supreme Court’s “Inclusive Communities” decision. Using these discussions as a background, we discuss and examine mortgage regulations issued by the Consumer Finance Protection Bureau following the financial crisis, describe recent developments in the FinTech industry discussing their implications for fair lending policy and minority borrowers more generally, and finally draw conclusions and make recommendations for improving the mortgage market outcomes of minority borrowers and increasing minority borrowers’ access to credit.

Suggested Citation

  • Marsha J. Courchane & Stephen L. Ross, 2018. "Evidence and Actions on Mortgage Market Disparities: Research, Fair lending Enforcement and Consumer Protection," Working papers 2018-14, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2018-14
    Note: Stephen L. Ross is the corresponding author
    as

    Download full text from publisher

    File URL: https://media.economics.uconn.edu/working/2018-14.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2016. "The Vulnerability of Minority Homeowners in the Housing Boom and Bust," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 1-27, February.
    2. Marsha Courchane & Rajeev Darolia & Peter Zorn, 2012. "Broker Compensation Patterns and Trends: 2005–2009," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 40(3), pages 229-251, September.
    3. Kristopher Gerardi & Stephen L. Ross & Paul Willen, 2011. "Understanding the foreclosure crisis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(2), pages 382-388, March.
    4. repec:arz:wpaper:eres2012-041 is not listed on IDEAS
    5. David Horne, 1997. "Mortgage Lending, Race, and Model Specification," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 43-68, February.
    6. 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.
    7. Agarwal, Sumit & Amromin, Gene & Ben-David, Itzhak & Chomsisengphet, Souphala & Evanoff, Douglas D., 2014. "Predatory lending and the subprime crisis," Journal of Financial Economics, Elsevier, vol. 113(1), pages 29-52.
    8. Stephanie Johnson & John Mondragon & Anthony DeFusco, 2017. "Regulating Household Leverage," 2017 Meeting Papers 327, Society for Economic Dynamics.
    9. Gerardi Kristopher & Willen Paul, 2009. "Subprime Mortgages, Foreclosures, and Urban Neighborhoods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-37, March.
    10. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, March.
    11. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1449-1496.
    12. repec:oup:rfinst:v:31:y:2018:i:1:p:175-205. is not listed on IDEAS
    13. Ghent, Andra C. & Hernández-Murillo, Rubén & Owyang, Michael T., 2014. "Differences in subprime loan pricing across races and neighborhoods," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 199-215.
    14. Anthony M.J. Yezer & Robert F. Phillips & Robert P. Trost, 1994. "Bias in estimates of discrimination and default in mortgage lending: the effects of simultaneity and self-selection," Proceedings, Federal Reserve Bank of Philadelphia, pages 197-222.
    15. Ross, Stephen L. & Turner, Margery Austin & Godfrey, Erin & Smith, Robin R., 2008. "Mortgage lending in Chicago and Los Angeles: A paired testing study of the pre-application process," Journal of Urban Economics, Elsevier, vol. 63(3), pages 902-919, May.
    16. Robert B. Avery & Glenn B. Canner & Robert E. Cook, 2005. "New information reported under HMDA and its application in fair lending enforcement," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sum, pages 344-394.
    17. Wei Jiang & Ashlyn Aiko Nelson & Edward Vytlacil, 2014. "Liar's Loan? Effects of Origination Channel and Information Falsification on Mortgage Delinquency," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 1-18, March.
    18. 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.
    19. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2016. "Editor's Choice Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class," Review of Financial Studies, Society for Financial Studies, vol. 29(7), pages 1635-1670.
    20. Paul S. Calem & Kevin Gillen & Susan Wachter, 2004. "The Neighborhood Distribution of Subprime Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 393-410, December.
    21. Michael LaCour-Little & Jing Yang, 2013. "Taking the Lie Out of Liar Loans: The Effect of Reduced Documentation on the Performance and Pricing of Alt-A and Subprime Mortgages," Journal of Real Estate Research, American Real Estate Society, vol. 35(4), pages 507-554.
    22. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    23. Blackburn, McKinley L. & Vermilyea, Todd, 2004. "Racial disparities in bank-specific mortgage lending models," Economics Letters, Elsevier, vol. 85(3), pages 379-383, December.
    24. 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.
    25. Vicki Been & Sewin Chan & Ingrid Gould Ellen & Josiah R. Madar, 2011. "Decoding the foreclosure crisis: Causes, responses, and consequences," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(2), pages 388-396, March.
    26. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2018. "What Drives Racial and Ethnic Differences in High-Cost Mortgages? The Role of High-Risk Lenders," Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 175-205.
    27. Lynn Elaine Browne & Geoffrey M.B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
    28. Giang Ho & Anthony Pennington-Cross, 2007. "The varying effects of predatory lending laws on high-cost mortgage applications," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 39-60.
    29. Hanson, Andrew & Hawley, Zackary & Martin, Hal & Liu, Bo, 2016. "Discrimination in mortgage lending: Evidence from a correspondence experiment," Journal of Urban Economics, Elsevier, vol. 92(C), pages 48-65.
    30. LaCour-Little, Michael & Calhoun, Charles A. & Yu, Wei, 2011. "What role did piggyback lending play in the housing bubble and mortgage collapse?," Journal of Housing Economics, Elsevier, vol. 20(2), pages 81-100, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fair Housing Act; Mortgage Discrimination; HMDA; Risk-based Pricing; Financial Crisis; Mortgage Foreclosure; Subprime Lending; HAMP; Legal Settlements; Disparate Impact; Inclusive Communities; Consumer Finance Protection Bureau; FinTech;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K25 - Law and Economics - - Regulation and Business Law - - - Real Estate Law
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2018-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark McConnel). General contact details of provider: http://edirc.repec.org/data/deuctus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.