Differences in the Cost of Mortgage Credit: Implications for Discrimination
Journal of Real Estate Finance and Economics
Posted: 3 Nov 1998
This paper accesses the mortgage origination processing system of a major national mortgage lender in the 1988-89 period to empirically measure mortgage interest rate differences paid by Asians, Hispanics, and African Americans. The calculated interest rate differences control for differences in market rates, rate lock protection, and borrower risk factors. In calculating a net interest rate, we test several different tradeoffs between interest rates and discount points. Under these strict controls, we find that conventional loan interest rates, while varying markedly between individuals, are largely race-neutral. Government credit models, however, show statistically significant, but economically insignificant, difference in interest rate premia paid by African Americans. These premia differences are approximately three basis points or $1.80 per month on an average loan. Additionally, African-American borrowers obtaining conventional mortgages and Hispanic borrowers obtaining government mortgages are not able to capture rate declines occurring during the borrower's rate-lock period.
Note: This is a description of the paper and is not the actual abstract.
JEL Classification: R0
Suggested Citation: Suggested Citation