We have just published a second brief on outcomes in the mortgage market based on the interesting paper by Natee Amornsiripanitch, a senior financial economist at the Federal Reserve Bank of Philadelphia. Again, the analysis is based on Home Mortgage Disclosure Act data, which contain applicant and co-applicant age and a rich set of applicant, property, and loan characteristics.
The first brief concluded that older mortgage applicants were significantly more likely to be turned down for a loan than their younger counterparts. One fairly convincing rationale for the pattern was age-related mortality risk. Having a borrower die can be costly to the lender, because it increases the likelihood of the loan being paid off early or entering foreclosure . Since mortality risk is higher for older borrowers than for younger borrowers, a rational and risk-averse lender should consider age-related risks when making lending decisions.This brief focuses on the relationship between age and the cost of mortgages.
Figure 1 presents the results for home purchase loans that were sold to Fannie Mae. Several notable patterns emerge. First, starting from the 30-39 age group, the relationship between borrower age and coupon rate increases monotonically. For example, 70+ borrowers pay, on average, 7.2 basis points more than the reference group or 8.4 basis points more than the 30-39 group. The generally positive relationship between borrower age and coupon rate is robust.
The bottom line, however, is that while the difference in application denials by age were large, the differences in coupon rates are small. Pretty interesting.
So
So we take a second mortgage on the first house instead I guess.
Wow, it's like my osteoporosis is really paying off! silverlining
That's concerning - what steps can be taken to ensure equal access to fair rates?
That's unfortunate - any advice for those in this situation?
This sucks
True. Take it from me.