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Do Minorities Pay More for Mortgages?
[Higher-priced home lending and the 2005 HMDA data]

Author

Listed:
  • Neil Bhutta
  • Aurel Hizmo

Abstract

We test for racial discrimination in the prices charged by mortgage lenders. We construct a unique data set from which we observe the three dimensions of a mortgage’s price: the interest rate, discount points, and fees. Although 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.

Suggested Citation

  • Neil Bhutta & Aurel Hizmo, 2021. "Do Minorities Pay More for Mortgages? [Higher-priced home lending and the 2005 HMDA data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(2), pages 763-789.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:2:p:763-789.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa047
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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