Bank Public Status and the Racial Gap in Mortgage Pricing
62 Pages Posted: 21 Oct 2019 Last revised: 15 Jan 2023
Date Written: April 4, 2022
The racial gap in mortgage interest rates in public banks is at least 50% lower than in private banks, and the effect is more pronounced in non-GSE (government-sponsored enterprises) loans. The results are not driven by differences in risk preferences between public and private banks or by non-random matches between banks and borrowers. The effect is more pronounced for banks with lower profitability, suggesting that the results are likely to be driven by increased pressure from the public equity market. We also show that the results are unlikely to be driven by public banks’ exposure to more regulatory scrutiny.
Keywords: Racial Gap, Public Market, Mortgage Pricing, HMDA
JEL Classification: G0, G21, G28, J16
Suggested Citation: Suggested Citation