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Racial/Ethnic Differences in Household Loan Delinquency Rate

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  • Okechukwu Anyamele

Abstract

This study investigates the differences in household loan delinquency rates of racial/ethnic groups. The study examines the role of demographic and socioeconomic characteristics of households, financial buffers, economic and financial triggers, high debt service ratio, and credit constraint in household delinquency. The study uses combined data from 2001, 2004, 2007, and 2010 Surveys of Consumer Finances (SCF). Having combined data allowed the separation of African Americans from Hispanics in this study. We employed both logistic regression and Blinder-Oaxaca decomposition analysis. The use of combined data from four survey years ensures the robustness of statistical results and analysis. The findings show that events that constitute shocks or triggers to households have a more significant impact on delinquency rate. The study found that payday loan borrowers are 4.6 times more likely to be delinquent on their loans than non-payday loan borrowers between 2007 and 2010. Also, the study finds significant statistical difference of delinquency rates among the racial/ethnic groups. Our results show that high debt service ratio (DSR) and being credit constrained have significant impact on the delinquency rates for all races. The results obtained showed that 59.96 % of the difference in delinquency between Whites and African Americans is explained by endowments, while 40.04 % is unexplained. Similarly, 97.35 % of the difference in delinquency between Hispanics and whites is explained by endowments, while 2.65 % of the difference is unexplained or is attributable to discrimination. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Okechukwu Anyamele, 2015. "Racial/Ethnic Differences in Household Loan Delinquency Rate," The Review of Black Political Economy, Springer;National Economic Association, vol. 42(4), pages 415-442, December.
    • Handle: RePEc:spr:blkpoe:v:42:y:2015:i:4:p:415-442
    DOI: 10.1007/s12114-015-9213-6
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    References listed on IDEAS

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    1. Ronald Straight, 2001. "Survey of consumer finances: Asset accumulation differences by race," The Review of Black Political Economy, Springer;National Economic Association, vol. 29(2), pages 67-81, December.
    2. John Y. Campbell & João F. Cocco, 2015. "A Model of Mortgage Default," Journal of Finance, American Finance Association, vol. 70(4), pages 1495-1554, August.
    3. Greene, William, 1998. "Sample selection in credit-scoring models1," Japan and the World Economy, Elsevier, vol. 10(3), pages 299-316, July.
    4. Karen E. Dynan & Kathleen W. Johnson & Karen M. Pence, 2003. "Recent changes to a measure of U.S. household debt service," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 89(Oct), pages 417-426, October.
    5. Chatterji, Aaron K. & Seamans, Robert C., 2012. "Entrepreneurial finance, credit cards, and race," Journal of Financial Economics, Elsevier, vol. 106(1), pages 182-195.
    6. Donald P. Morgan, 2007. "Defining and detecting predatory lending," Staff Reports 273, Federal Reserve Bank of New York.
    7. Fidel Ezeala-Harrison & Glenda Glover & Jane Shaw-Jackson, 2008. "Housing Loan Patterns Toward Minority Borrowers in Mississippi: Analysis of Some Micro Data Evidence of Redlining," The Review of Black Political Economy, Springer;National Economic Association, vol. 35(1), pages 43-54, March.
    8. Ciochetti, Brian A. & Deng, Yongheng & Lee, Gail & Shilling, James D. & Yao, Rui, 2003. "A Proportional Hazards Model of Commercial Mortgage Default with Originator Bias," The Journal of Real Estate Finance and Economics, Springer, vol. 27(1), pages 5-23, July.
    9. Jonathan Crook, 2001. "The demand for household debt in the USA: evidence from the 1995 Survey of Consumer Finance," Applied Financial Economics, Taylor & Francis Journals, vol. 11(1), pages 83-91.
    10. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
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    Cited by:

    1. Okechukwu Dennis Anyamele & John Obioma Ukawuilulu & Benedict Ndubisi Akanegbu, 2017. "The Role of Wealth and Mother’s Education in Infant and Child Mortality in 26 Sub-Saharan African Countries: Evidence from Pooled Demographic and Health Survey (DHS) Data 2003–2011 and African Develop," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1125-1146, February.
    2. Okechukwu D. Anyamele, 2018. "Racial Ethnic differences in Household Loan Delinquency Rate in recent financial crisis: Evidence from 2007 and 2010 Survey of Consumer Finances," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(3), pages 1-4.

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    More about this item

    Keywords

    Delinquency; Payday loans; Race and ethnicity; Blinder-Oaxaca decomposition; Survey of consumer finances and logistic regression; D12; D14; G00; J15;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G00 - Financial Economics - - General - - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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