Mortgage loans, Reverse

Reverse mortgages are designed to allow house-rich but cash-poor homeowners the ability to tap the equity in their homes. This unique mortgage product has several features that distinguish it from a traditional mortgage, including that no principal or interest payments are made to the lender. Using 2018 - 2020 HMDA data, I test for disparate treatment in outcomes by race, ethnicity and gender. I test for redlining disparate outcomes using the census track minority population percentage as a proxy for neighborhood and test for loan pricing disparate outcomes using the interest rate charged. I test for origination disparate outcomes by comparing approval denial rates. My findings indicate (i) that lenders are more likely to reject applications from borrowers in census tracks with higher percentages of minorities, (ii) that lenders are more likely to reject applications from minority borrowers and (iii) that lenders charge higher interest rates to minority borrowers. I do not find that lenders charge higher interest rates in census tracks with higher percentages of minorities.