Document Type

Working Paper

Publication Date



An Empirical Investigation of Discrimination in the Hispanic Mortgage Market This Master's Thesis empirically investigates whether Hispanics are discriminated against in the mortgage market. The use of the 1989 Metropolitan file of the American Housing Survey allows me to test the effects of borrower race and default risk in mortgage lending. The empirical analysis is based on a probit model of whether Hispanics, blacks and non-Hispanic whites households obtain FHA or conventional mortgages. FHA mortgages are fully insured and generally require a lower down payment, but are typically more expensive. Given a choice between FHA and conventional mortgages, borrowers will prefer the relatively cheaper conventional mortgages. Therefore, households obtaining FHA mortgages will tend to be rationed in the conventional market. After controlling for various socioeconomic characteristics any remaining race effect in the probit model may be reflective of events unrelated to default risk. Results from this investigation indicate that the likely hood of Hispanics obtaining FHA mortgages is not significantly different from that of white households. However, blacks are more likely to obtain FHA loans than Hispanic and white borrowers. These results suggest that Hispanics are not rationed as are blacks in the conventional mortgage market.


Center for Regional Studies Papers 103


Southwest Hispanic Research Institute; Center for Regional Studies


SW Hispanic Research Institute