The Unequal Costs of Native American Homeownership - Helen Banga

Thus, if a borrower refinances or moves before the term is up, APR understates the effective annual cost of the loan because it spreads the upfront fees which the borrower pays regardless of how long they hold the loan, over the complete term of the loan. [...] The interest rate clearly includes the interest the borrower pays on the loan, but does not include other fees paid by the borrower and thus as a measure of price is not affected by how long the borrower holds the loan. [...] More formally, to determine whether the disparities in loan approvals differ between home-only loans and manufactured home mortgages, we regress the likelihood of approval on the two AIAN indicators, the home-only loan indicator and the interaction between both AIAN indicators and the home-only status indicator while controlling for borrower and basic loan characteristics. [...] A positive (and significant) coefficient on the interaction term between the home-only loan status and one of the AIAN indicators means that the AIAN disparities in home-only approvals is smaller than the on- reservation AIAN disparities in manufactured home mortgage approvals. [...] When we randomly sample 1000 White loans and add them to the on-reservation AIAN HMDA loans, the on-reservation AIAN disparities in loan pricing are mostly eliminated at the lower end of the pricing distribution but remain large at the top end of the distribution.