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Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time

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This paper examines racial disparities in mortgage processing time prior to the global financial crisis. We find that Black borrowers are underrepresented and experience a longer processing time than White borrowers among the mortgages securitized by government-sponsored enterprises. At the same time, Black borrowers are overrepresented and face a similar processing time among privately securitized mortgages. Additionally, Black borrowers are strongly associated with the faster segments of mortgage markets, faster lenders within each segment, and the types of loan products that are processed faster, all of which subsequently experienced higher defaults.

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  • Bin Wei & Feng Zhao, 2022. "Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time," FRB Atlanta Working Paper 2022-1, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:94781
    DOI: 10.29338/wp2022-01
    Note: The authors thank Raphael Bostic, Toni Braun, Chris Cunningham, Andrew Ellul, Isil Erel, Kris Gerardi, Mark Jensen, Benjamin Keys (discussant), Camelia Kuhnen (editor), Uday Rajan (editor), Philipp Schnabl, James Vickery (discussant), Larry Wall, and Vincent Yao for very helpful comments. They also thank participants in the 2021 Review of Corporate Finance Studies winter conference and the 2021 Atlanta Fed conference "Racial Inequality and Disparities in Financial Markets" for very helpful comments. The views expressed here are those of the authors and not necessarily those of the Banks for International Settlements, the Federal Reserve Bank of Atlanta, or the Federal Reserve System. Any remaining errors are the authors' responsibility.
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    More about this item

    Keywords

    processing time; lending standards; racial disparities; mortgage loans;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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