Ethno-Racial Disparities in Adverse Experiences at Mortgage Closing: Evidence From the National Survey of Mortgage Originations

Abstract

The mortgage industry is central to ethno-racial stratification in access to homeownership. Obtaining a successful mortgage origination requires many steps, points of verification, and interactions between clients, realtors, and mortgage brokers. Ample research has documented ethno-racial inequality in mortgage loan outcomes and during the early stages of the homebuying process, such as minority steering and quality of service. However, it is unclear whether and to what extent ethno-racial inequality is exhibited during the final stage of the homebuying process. Therefore, this article draws on the National Survey of Mortgage Originations, an annual representative sample of new mortgage loan originations, from 2013 to 2017, to assess ethno-racial disparities in adverse loan experiences during the mortgage closing stage. I show that black mortgage holders are more likely to have an adverse experience (a negative experience, an acute lending practice, or an unexpected financial cost) during the closing, compared to Non-Hispanic whites and Asians. Latino and black mortgage holders face similar disparities when it comes to unexpected financial costs (the most severe adverse experience) during the closing appointment. These ethno-racial disparities during the final stage of the mortgage process are extremely troubling as they increase the administrative and economic costs for minority homebuyers. Implications for ethno-racial wealth inequality are discussed.