This article analyzes the dynamics of the commonly used indices for Adjustable Rate Mortgages, and systematically compares the eeects of their time series properties on the interest rate sensitivity of adjustable rate mortgages. Our ARM valuation methodology allows us simultaneously to capture the eeects of index dynamics, discrete coupon adjustment, mortgage prepayment, and both lifetime and p...

Loan officers may discriminate based on facial features. Algorithmic scoring may imply disparate impact due to the inappropriate use of big data by FinTech lenders. To investigate these discrimination channels, we estimate a treatment-based OaxacaBlinder decomposition based on the unique mortgage-default-risk setting of the GSEs. We find that lenders reject African-American and Hispanic applica...

U.S. fair-lending law prohibits lenders from making credit determinations that disparately affect minority borrowers if those are based on characteristics unrelated to creditworthiness. Using an identification under this rule, we show risk-equivalent Latinx/Black pay significantly higher interest rates GSE-securitized and FHA-insured loans, particularly in high-minority-share neighborhoods. We ...

This paper examines racial and ethnic differences in high cost mortgage lending in seven diverse metropolitan areas from 2004-2007. Even after controlling for credit score and other key risk factors, African-American and Hispanic home buyers are 105 and 78 percent more likely to have high cost mortgages for home purchases. The increased incidence of high cost mortgages is attributable to both s...

This paper provides explicit and powerful tests of contingent claims approaches to modeling mortgage default. We investigate a model of "frictionless" default (i.e., one in which transactions costs, reputation costs, and moving costs play no role) and analyze its implications--the relationship between equity and default, the timing of default, its dependence upon initial conditions, and the sev...