Credit rationing, race, and the mortgage market

Stuart A. Gabriel, Stuart S. Rosenthal

Research output: Contribution to journalArticlepeer-review

72 Scopus citations


This study applies microdata from the 1983 Survey of Consumer Finances to evaluate the effects of borrower race and default risk in mortgage lending. The empirical analysis is based on a probit model of whether borrowers obtain FHA or conventional mortgages; the former are fully insured and are characterized by easier downpayment constraints, but are typically more expensive. Hence, households borrowing through the FHA will tend to be credit constrained in the conventional market. Results of the analysis indicate that variables which proxy lender concerns about default risk and cost have an important effect on the type of loan borrowers obtain. Empirical estimates also suggest that minority households are significantly less likely to obtain conventional financing than whites, even after controlling for various proxies of default risk. These results suggest that race effects in mortgage lending may persist for reasons unrelated to borrower default risk.

Original languageEnglish (US)
Pages (from-to)371-379
Number of pages9
JournalJournal of Urban Economics
Issue number3
StatePublished - May 1991
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies


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