Does Borrower and Broker Race Affect the Cost of Mortgage Credit?

Ambrose, B.W., Conklin, J.N. and Lopez, L.A., "Does borrower and broker race affect the cost of mortgage credit?" The Review of Financial Studies, 2021, 34(2), pp.790-826. https://doi.org/10.1093/rfs/hhaa087

50 Pages Posted: 25 Jul 2017 Last revised: 31 Aug 2021

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University - Department of Insurance & Real Estate

James Conklin

University of Georgia; Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Luis A. Lopez

University of Illinois at Chicago

Date Written: June 8, 2020

Abstract

We test for pricing disparities in mortgage contracts using a novel dataset that allows us to observe the race and ethnicity of both parties to the loan. We find that minorities pay between three and five percent more in fees than similarly qualified whites when obtaining a loan through the same white broker. Critically, we find that the premium paid by minorities depends on the race of the broker. We also examine recent policy changes regarding broker compensation rules that may reduce these price disparities, but may also limit access to credit for minorities.

Keywords: Discrimination, Credit Rationing, Regulations, Dodd-Frank Act, Mortgages

JEL Classification: J15, L85, R20

Suggested Citation

Ambrose, Brent W. and Conklin, James and Lopez, Luis A., Does Borrower and Broker Race Affect the Cost of Mortgage Credit? (June 8, 2020). Ambrose, B.W., Conklin, J.N. and Lopez, L.A., "Does borrower and broker race affect the cost of mortgage credit?" The Review of Financial Studies, 2021, 34(2), pp.790-826. https://doi.org/10.1093/rfs/hhaa087, Available at SSRN: https://ssrn.com/abstract=3006793 or http://dx.doi.org/10.2139/ssrn.3006793

Brent W. Ambrose

Pennsylvania State University - Department of Insurance & Real Estate ( email )

Smeal College of Business,
Penn State University
University Park, PA US-0-PA 16802
United States
8148670066 (Phone)

HOME PAGE: http://https://sites.psu.edu/brentwambrose/

James Conklin (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Luis A. Lopez

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

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