Does Borrower and Broker Race Affect the Cost of Mortgage Credit?

We test for pricing disparities in mortgage contracts using a novel data set that allows us to observe the race and ethnicity of both parties to the loan. We find that minorities pay between 3% and 5% more in fees than similarly qualified whites when obtaining a loan through the same white broker. Critically, we find that the premium paid by minorities depends on the race of the broker. We also examine recent policy changes around broker compensation rules that may not only reduce these price disparities but may also limit access to credit for minorities.

Automated summary

The study reveals that minorities pay higher fees compared to similarly qualified whites when obtaining a loan through white brokers. Additionally, the premium paid by minorities is dependent on the race of the broker. Recent policy changes may not only reduce price disparities but also limit credit access for minorities.