Ethno-racial stratification in the mortgage market: The role of co-applicants

Abstract

Unequal access to homeownership is central to ethno-racial stratification. Ample research demonstrates large ethno-racial disparities that exist in access and outcomes throughout the mortgage process at both the individual and neighborhood levels. The underlying assumption in most of these studies is that the couples applying for a mortgage are ethno-racially homogenous. However, the ethno-racial stratification structure is unclear when examining interracial couples in the mortgage market. This paper draws on annual data from the Home Mortgage Disclosure Act (HMDA) from 2010 to 2017 to assess variation in ethno-racial disparities in loan outcomes associated with different ethno-racial couplings. I show that ethno-racial disparities in loan outcomes vary tremendously when factoring the ethno-racial identity of the co-applicant. Interracial couples involving a black or Latino co-applicant are more likely to experience a high-cost loan or be denied a mortgage than mono-racial white couples. The results for Asian co-applicants vary, depending on the adverse loan outcome. When comparing interracial couples to mono-racial couples, the observed lending pattern provides evidence of a tri-racial hierarchy in the mortgage market.