Professor Steve Ross’s paper “The Vulnerability of Minority Homeowners in the Housing Boom and Bust” with Patrick Bayer and Fernando Ferreira was the lead article in the February issue of the American Economic Journal: Economic Policy.

In this paper, they find that African-American and Hispanic borrowers have substantially higher delinquency and foreclosure rates during the financial crisis even after controlling for detailed borrower and loan risk factors.  These differences are concentrated heavily among homebuyers who purchased their home very near the peak of the market, even after controlling for negative equity associated with the timing of the purchase.  For refinance mortgages, they find a similar pattern linked to when the home was purchased, rather than the date of the refinance mortgage.

They argue that the findings are consistent with higher risk borrowers, especially higher risk minority borrowers, being drawn into the market during the housing market expansion.