Junior Faculty Grant Awardee: Talia Gillis, School of Law

Fairness Implications of Bargaining and Search Behavior in Mortgage Origination and Servicing

Talia Gillis, Associate Professor of Law

Mortgage terms can have a profound and lasting impact on household wealth. While most research on variation in mortgage terms has focused on risk-based pricing, meaning the relationship between creditworthiness assessments and loan pricing, the research team intends to focus on two understudied aspects of mortgage variation that can reflect and perpetuate existing inequities. On the origination side, Professor Gillis is interested in studying how a borrower’s searching behavior for mortgage funding impacts loan offers from originators and the ultimate terms of the loan, and how this effect might vary for different groups.

Mortgage inequities are not only reflected in differences at the time of origination. Over the life of a mortgage terms can be updated or modified by mortgage servicers when households enter financial distress. Professor Gillis is interested in understanding how servicers modify loans when a borrower defaults and whether the option to avoid foreclosure is equally available to different groups. Focusing on disparities across different geographic regions, income groups, and other demographic characteristics, the research groups intends to study the implications of disparities in origination and modification of loans that go beyond the initial transaction. Less preferable terms in mortgage origination increase the chances that a borrower will default and higher loan offers may lead borrowers to end up without a mortgage. Differences in loan modification are also likely to have lasting effects on borrowers’ credit profiles and future access to credit.

Learn more about Professor Talia Gillis here and on LinkedIn.

This project was funded through the Office of the Provost Grants Program for Junior Faculty who Contribute to the Diversity Goals of the University.