Do Minorities Pay More for Mortgages?

45 Pages Posted: 21 May 2020

See all articles by Neil Bhutta

Neil Bhutta

Board of Governors of the Federal Reserve System

Aurel Hizmo

Board of Governors of the Federal Reserve System

Date Written: January 31, 2020

Abstract

We test for racial discrimination in the prices charged by mortgage lenders. We construct a unique dataset where we observe all three dimensions of a mortgage's price: the interest rate, discount points, and fees. While we find statistically significant gaps by race and ethnicity in interest rates, these gaps are offset by differences in discount points. We trace out point-rate schedules and show that minorities and whites face identical schedules, but sort to different locations on the schedule. Such sorting may reflect systematic differences in liquidity or preferences. Finally, we find no differences in total fees by race or ethnicity.

Keywords: Discrimination; Fair lending; Mortgage; Points; Interest rate; FHA; Consumer protection; High-cost mortgage

JEL Classification: G21; G28; R51

Suggested Citation

Bhutta, Neil and Hizmo, Aurel, Do Minorities Pay More for Mortgages? (January 31, 2020). FEDS Working Paper No. 2020-007 https://doi.org/10.17016/FEDS.2020.007 , Available at SSRN: https://ssrn.com/abstract=3600400

Neil Bhutta (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Aurel Hizmo

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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