Credit tightening and Black-White mortgage disparities at the approval and pricing margins
Description
This manuscript asks whether the historically low mortgage rates of the COVID-era housing boom narrowed racial gaps in mortgage access. Using 10.1 million conventional home purchase applications from Home Mortgage Disclosure Act data between 2018 and 2022, it tracks Black-White denial disparities across a full boom-and-tightening cycle.
The conditional Black-White denial gap remained roughly flat during the 2020-2021 boom but widened when mortgage rates rose sharply in 2022. The widening is concentrated in settings where lender discretion is greatest, while a separate pricing-margin analysis shows a persistent Black-White rate gap among originated loans without the same post-boom widening.
What this paper contributes.
Studies disparities across changing credit conditions.
The paper compares a pre-COVID baseline, the low-rate boom, and the 2022 tightening period within one market cycle.
Separates approval and pricing outcomes.
Denial disparities and interest-rate differences are analyzed as related but distinct mortgage-market margins.
Shows asymmetric widening in denials.
The Black-White approval penalty widened in 2022 after staying roughly stable during the boom.
Highlights contraction-period fair lending risk.
The evidence suggests that fair lending scrutiny may be especially important when credit conditions tighten.