Racial Discrimination and Mortgage Lending
Posted: 22 Aug 2012
Date Written: August 22, 2012
Looking at a sample of conventional fixed-rate mortgages, this paper examines whether lending practices are consistent with the competitive hypothesis that the racial and ethnic composition of the borrower's neighborhood affects the contract rate charged only to the extent that these characteristics objectively influence the probability of the loan defaulting or prepaying. Our results, however, reject this hypothesis, showing instead that borrowers in predominantly black neighborhoods pay a significantly higher contract rate than is consistent with evidence of their behavior.
Keywords: Racial discrimination, Mortgage lending
Suggested Citation: Suggested Citation