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
Date Written: June 8, 2020
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: Suggested Citation