An Unintended Consequence of Mortgage Financing Regulation – a Racial Disparity

Autor:	James B. Kau, Henry J. Munneke, Lu Fang
Rok vydání:	2018
Předmět:	Finance Economics and Econometrics 050208 finance Racial disparity business.industry 05 social sciences social sciences Prepayment of loan Disparate impact Urban Studies Loan Accounting 0502 economics and business Business 050207 economics Financial services
Zdroj:	The Journal of Real Estate Finance and Economics. 59:549-588
ISSN:	1573-045X 0895-5638
Popis:	This study investigates whether mortgage financing regulation unintentionally leads to minorities paying a higher loan contract rate under a risk-based pricing system. We provide evidence that minority borrowers prepay less frequently than comparable non-minority borrowers and thus have lower termination risk. Racially neutral lending policies prohibit the lender from considering this reduced termination risk, resulting in a disparate impact from the overstatement of a minority borrower’s termination risk. While we find little evidence of a rate differential among borrowers under the current regulatory structure, results show minorities pay a higher rate when the variation in termination risk is recognized.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::59ab44c180d7481cfe26c543f5b45223 https://doi.org/10.1007/s11146-018-9683-y Zobrazit plný text záznamu Full text from SpringerLink