What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders / Patrick Bayer, Fernando Ferreira, Stephen L. Ross.

Format:

Book

Author/Creator:

Bayer, Patrick.

Contributor:

National Bureau of Economic Research.

Ferreira, Fernando.

Ross, Stephen L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22004.

NBER working paper series no. w22004

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

This paper examines racial and ethnic differences in high cost mortgage lending in seven diverse metropolitan areas from 2004-2007. Even after controlling for credit score and other key risk factors, African-American and Hispanic home buyers are 105 and 78 percent more likely to have high cost mortgages for home purchases. The increased incidence of high cost mortgages is attributable to both sorting across lenders (60-65 percent) and differential treatment of equally qualified borrowers by lenders (35-40 percent). The vast majority of the racial and ethnic differences across lender can be explained by a single measure of the lender's foreclosure risk and most of the within-lender differences are concentrated at high-risk lenders. Thus, differential exposure to high-risk lenders combined with the differential treatment by these lenders explains almost all of the racial and ethnic differences in high cost mortgage borrowing.

Notes:

Print version record

February 2016.