Racial and Ethnic Disparities in Mortgage Prepayment

Journal of Housing Economics, Vol.4, Dec 1995

Posted: 18 Apr 1998

See all articles by Austin Kelly

Austin Kelly

Federal Housing Finance Agency (FHFA)

Abstract

This paper examines differences in mortgage prepayment rates between white, black, and Hispanic borrowers. Detailed, micro-level data from the Dept. of Veteran Affairs GI Mortgage program for loans written between 1971 and 1990 are used to estimate a logistic prepayment function. Substantial differences are found between blacks and whites in prepayment behavior. The higher prepayment rate for white borrowers vs. black borrowers is more than can be can be explained by differences in loan size or estimated equity, and is not consistent with an explanation based solely on mobility differences. Differences between white and Hispanic prepayment rates are much smaller and are largely explained by differences in loan size and borrower age. A surprisingly slow rate of prepayment is found for these mortgages. By the end of 1990, 19% of mortgages originated in 1981-1982 to white borrowers are still active, and 26% of the loans originated to black borrowers are still active.

JEL Classification: G21

Suggested Citation

Kelly, Austin J., Racial and Ethnic Disparities in Mortgage Prepayment. Journal of Housing Economics, Vol.4, Dec 1995, Available at SSRN: https://ssrn.com/abstract=5550

Austin J. Kelly (Contact Author)

Federal Housing Finance Agency (FHFA) ( email )

1700 G St. NW
Washington, DC 20552
United States
202 414-1336 (Phone)

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