subprime mortgage defaults by demographics

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The role of neighborhood characteristics in mortgage default risk: evidence from New York City We explore possible explanations for this second finding and conclude that it likely reflects differential treatment of black neighborhoods by the mortgage industry in ways that are unobserved in our data.

Second, default rates on home purchase mortgages are higher in census tracts with larger shares of black residents, regardless of the borrower’s own race. First, default rates increase with the rate of foreclosure notices and the number of lender-owned properties (REOs) in the tract. Using a rich database of non-prime mortgages from New York City, we find that census tract level neighborhood characteristics are important predictors of default behavior, even after controlling for an extensive set of controls for loan and borrower characteristics.

Subprime mortgage defaults by demographics