A new study led by a finance professor from Florida Atlantic University’s College of Business shows that there is a wide disparity between white and black borrowers in today’s real estate market.

Ping Cheng, Ph.D worked with Zhenghou Lin, Ph.D., and Yingchun Liu, Ph.D., of California State University, Fullerton to gather research for the study, using data from the U.S. Survey of Consumer Finance. The researchers found that black borrowers pay 29 basis points more than white borrowers, and the groups that were most affected included young black borrowers with low education and black women.

“Our finding is that there is a discrepancy between blacks and whites in terms of mortgage rates,” Cheng said in a press release. “When we further dig into the data, we find that generally the low-income black women who are heads of households pay the highest. They are the most vulnerable to subprime lending and higher mortgage rates.”

A trend shows that income and credit disqualify these two groups for prime lending rates; the study was not able to show a direct correlation as for why this discrepancy exists but can only suggest that the high rate discrepancy is consistent with the behavior of racial discrimination.

Black women are charged 57.36 basis points more than white women on average. This would mean that for a $250,000 home with a 30-year mortgage at the current 3.75 percent rate, black women would pay $82.86 more per month.

The study article was published in The Journal of Real Estate Finance and Economics’ July 2015 issue.


Source:
http://www.prnewswire.com/news-releases/fau-study-finds-racial-disparity-exists-between-what-black-and-white-borrowers-pay-for-home-mortgages-300130974.html

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