Preferential Treatment in Financial Contracts: Does Broker Race Affect Mortgage Prices?

79 Pages Posted: 25 Jul 2017 Last revised: 25 May 2018

Brent W. Ambrose

Pennsylvania State University

James Conklin

University of Georgia

Luis Lopez

Pennsylvania State University

Date Written: May 22, 2018

Abstract

We test for preferential treatment in financial contracts using data on mortgages that allow us to observe the race and ethnicity of both parties to the contract. We find that minorities pay over 8 percent (or $400) more in fees than similarly qualified whites when obtaining a loan through a white broker. Minorities, however, do not encounter preferential treatment from minority brokers. Furthermore, whites working with minority brokers pay fees similar to those of minorities. Recent changes in broker compensation rules due to the Dodd-Frank Act 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, Preferential Treatment in Financial Contracts: Does Broker Race Affect Mortgage Prices? (May 22, 2018). Available at SSRN: https://ssrn.com/abstract=3006793 or http://dx.doi.org/10.2139/ssrn.3006793

Brent W. Ambrose

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

James Conklin (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Luis Lopez

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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