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Reverse Mortgage Lending Disparities and the Economically Vulnerable

Abstract

A fair lending analysis seeks to determine whether a lender’s underwriting, pricing, and marketing decisions are free from a prohibited basis effect. That is, free from a significant effect based on the protected categories identified in the federal Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FH Act). This study examined the underwriting decisions of reverse mortgages to determine whether race/ethnicity, gender, or age were significant factors in those decisions. The analysis used loan-level data from the expanded 2019 Home Mortgage Disclosure Act (HMDA). A logistic regression model was used to estimate the denial/approval decisions. The results showed statistically significant lending disparities by race/ethnicity, gender, and age. Black and Hispanic denial odds for reverse mortgages were 107% and 48% higher, respectively, than for non-Hispanic white applicants. Denial odds for women were 12% lower than for men. Denial odds for applicants aged 74 years and older were 16% lower than for those aged 62 to 73 years old. Other statistically significant model predictors included loan purpose, non-amortizing features, closed-end loans, fixed-rate interest, indirect application channel (wholesale), income, loan amount, home equity, and interaction terms. The analysis identified serious deficiencies in the HMDA data that impact the ability to investigate fair lending disparities in reverse mortgages. This concern evolves from recent legislative exemptions for certain lenders reporting on critical data fields. The study illuminated reverse mortgage lending disparities by race/ethnicity, suggesting economic harm to black and Hispanic applicants. To more effectively monitor these disparities, the HMDA law should be amended to remove all data exemptions.

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Correspondence to Debby Lindsey-Taliefero.

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Lindsey-Taliefero, D., Kelly, L. Reverse Mortgage Lending Disparities and the Economically Vulnerable. Int Adv Econ Res (2021). https://doi.org/10.1007/s11294-021-09831-6

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Keywords

  • Fair lending
  • Reverse mortgage
  • Predatory lending
  • HMDA

JEL

  • G21
  • G28
  • J15
  • J18