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Is there Discriminatory Mortgage Pricing against Immigrants in the Spanish Lending Market?

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  • Luis Diaz-Serrano
  • Josep M. Raya

Abstract

In this paper, we investigate whether evidence of discriminatory treatment against immigrants in the Spanish mortgage market exists. More specifically, we test whether, ceteris paribus, immigrant borrowers tend to be charged with higher interest rates on their mortgages than their Spanish born counterparts. To do so, we use a unique dataset on granted mortgages that contains information not only regarding the conditions of the loan but also the socioeconomic characteristics of the mortgagors. We observe that immigrants are systematically charged with higher interest rates. We apply the well known Oaxaca-Blinder decomposition to measure the extent to which this disparate treatment of lenders in mortgage pricing against immigrants is due to discrimination. Our results indicate that approximately two thirds of the gap in the interest rate between Spanish born and immigrant borrowers can be attributed to discriminatory treatment. JEL Classification: R21, G21, J14 Keywords: immigration, discrimination, mortgage pricing, housing market

Suggested Citation

  • Luis Diaz-Serrano & Josep M. Raya, 2011. "Is there Discriminatory Mortgage Pricing against Immigrants in the Spanish Lending Market?," ERSA conference papers ersa11p1869, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa11p1869
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    References listed on IDEAS

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    1. Robert F. Phillips & Robert P. Trost & Anthony M.J. Yezer, 1994. "Bias in estimates of discrimination and default in mortgage lending: the effects of simultaneity and self-selection," Proceedings, Federal Reserve Bank of Philadelphia, pages 197-222.
    2. Black, Harold A. & Boehm, Thomas P. & DeGennaro, Ramon P., 2003. "Is there discrimination in mortgage pricing? The case of overages," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1139-1165, June.
    3. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    4. Glenn B. Canner & Dolores S. Smith, 1991. "Home Mortgage Disclosure Act: expanded data on residential lending," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 859-881.
    5. Marsha Courchane & David Nickerson, 1997. "Discrimination Resulting from Overage Practices," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 133-151, February.
    6. Marsha J. Courchane, 2007. "The Pricing of Home Mortgage Loans to Minority Borrowers: How Much of the APR Differential Can We Explain?," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 399-440.
    7. Hunter, William C & Walker, Mary Beth, 1996. "The Cultural Affinity Hypothesis and Mortgage Lending Decisions," The Journal of Real Estate Finance and Economics, Springer, vol. 13(1), pages 57-70, July.
    8. Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
    9. Black, Harold & Schweitzer, Robert L & Mandell, Lewis, 1978. "Discrimination in Mortgage Lending," American Economic Review, American Economic Association, vol. 68(2), pages 186-191, May.
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    Cited by:

    1. Natalya Presman & Nitzan Tzur-Ilan, 2019. "Does Location Matter? Evidence on Differential Mortgage Pricing in Israel," Bank of Israel Working Papers 2019.14, Bank of Israel.
    2. Teodora Cristina Barbu & Iustina Alina Boitan, 2018. "Immigrants’ impact on financial market – European countries’ evidence," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(1), pages 183-212.

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    More about this item

    Keywords

    immigration; discrimination; mortgage pricing; housing market;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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