Bank Public Status and the Racial Gap in Mortgage Pricing

62 Pages Posted: 21 Oct 2019 Last revised: 4 Apr 2022

See all articles by Yongqiang Chu

Yongqiang Chu

Belk College of Business, UNC Charlotte

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students

Tim Zhang

University of Wyoming, College of Business

Date Written: April 4, 2022

Abstract

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

Chu, Yongqiang and Ma, Xiaonan (Flora) and Zhang, Tim, Bank Public Status and the Racial Gap in Mortgage Pricing (April 4, 2022). Available at SSRN: https://ssrn.com/abstract=3461061 or http://dx.doi.org/10.2139/ssrn.3461061

Yongqiang Chu (Contact Author)

Belk College of Business, UNC Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
7046877695 (Phone)

Xiaonan (Flora) Ma

University of South Carolina, Darla Moore School of Business, Department of Finance, Students ( email )

1014 Greene Street
Columbia, SC 29208
United States

Tim Zhang

University of Wyoming, College of Business

1000 E. University Avenue
Department 3275
Laramie, WY 82071
United States

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