Who defaults on their home mortgage?

Abstract

Since February 2010, detailed information on every home mortgage default and foreclosure in New York State must be filed with the New York State Banking Department (NYSBD). Pairing the NYSBD's data with data on originations from the Home Mortgage Disclosure Act (HMDA) enables us to identify the race and ethnicity of borrowers who defaulted on their home mortgages (in New York State). Like many previous studies, we find strong racial and ethnic disparities in lending practices, but we do not find conclusive evidence that HMDA-measurable forms of discrimination increased a borrower's probability of default. After controlling for other factors, we find that the interest rates charged to black and Latino borrowers tended to be higher than the ones charged to their white and non-Latino counterparts. This may be one reason why blacks and Latinos tend to default at a higher rate, but other factors, such as the tendency of black and Latino borrowers to take out larger loans than their white and non-Latino counterparts, may also have contributed to the higher default rate among black and Latino borrowers