AB - We examine trends in racial and ethnic discrimination in U.S. housing and mortgage lending markets through a quantitative review of studies. Section I of the article outlines a simple model of bank lending and examines two popular claims made about lending discrimination. For example, a woman on maternity leave sued a credit union for discrimination based on sex and familial status for rejecting her home renovation loan because they would not consider her income until she returned to work. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol.

21646819. 0. 3. After all, Black homeownership reached a record-low of 40.6% in 2020. While Ferguson and Peters (2000) explain that discrimination may persist indefinitely even in competitive markets when discrimination is not costly to the lender, Michell and Pearce (2011) provide some evidence that the types of lenders that enter a market can influence the extent to which competition drives down discrimination. Although we find the empirical evidence on lending discrimination to be inconclusive, most of what is available suggests that minorities are discrimi-nated against when they seek residential . Overt discrimination exists when a lender openly treats an applicant differently on a prohibited basis. Overt evidence of discrimination, which occurs when a lender blatantly discriminates on a prohibited basis; 2. The study, "Racial Discrimination in the U.S. Housing and Mortgage Lending Markets: A Quantitative Review of Trends, 1976-2016," found Black borrowers are more likely to be rejected when they apply for a loan and are more likely to receive a high-cost mortgage. t. e. Mortgage discrimination or mortgage lending discrimination is the practice of banks, governments or other lending institutions denying loans to one or more groups of people primarily on the basis of race, ethnic origin, sex or religion. An alphabet soup of federal agencies can refer evidence of violations of these laws to HUD or the justice department for investigation, but referrals have dropped precipitously over the past decade. Evidence on Discrimination in Mortgage Lending. Evidence on Discrimination in Mortgage Lending Helen F. Ladd he ability to get a mortgage is often the key to an individual's ability to purchase a home. 1982. Recent studies have used statistical methods to show that minorities were more likely than equally qualified whites to receive high-cost, high-risk loans during the U.S. housing boom, evidence taken to suggest widespread discrimination in the mortgage lending industry. With the final version of this paper recently published in one of the most respected academic journals in the economics profession, we can now look back on the debate over the presence of discrimination in mortgage lending to see what we have learned. The qualitative evidence suggests that loan originators often gained the confidence of potential borrowers through the manipulation of trusted co-ethnic intermediaries in community service organizations and churches. 5. 6 Although these data did show that substantially fewer mortgage loans were originated in census tracts with a high proportion of minorities, they did not (and were intended to) provide evidence of discrimination against individual applicants. Daily Kos, June 17, 2022, Discrimination in mortgage lending persists due to Trump.Now Biden's working to combat it. Overt Discrimination. Our results show net discrimination by 1.8% of MLOs through non-response. Racial discrimination in lending hasn't stopped since the 1968 Fair Housing Act, but there are a few ways to ensure a lender can't deny you. We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. In: Briggs X, editor. The lenders who originate mortgage loans include de-pository institutions such as commercial banks, mutual savings banks, and savings and loan associations, as well as nondepository . This policy violated the ECOA's prohibition on discrimination based on age. Disparate treatment. mortgage, tend to receive less generous loan amounts and terms. Stephen Ross, 2002. Source: Third, I show the substantial

J R Estate Lit. Several methods were used, the worst of which was redlining (denial of a loan based on the applicant's address). Article. Discrimination in mortgage lending: Evidence from a correspondence experiment .

Evidence on Discrimination in Mortgage Lending. This key civil rights debate in the wake of the Fair Housing Act 25 years prior is evaluated and clarified through rigorous review of fair lending . Washington, D.C. 20037 Phone: 202.833.7200 Fax: 202.429.0687 E-Mail: [email protected] Liddell, Francis Douglass Kelly (1983) "Simplified exact analysis of . 2002. Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. After a long history of well-known racial discrimination and unequal outcomes from traditional lenders in the market, academic researchers have provided evidence that Fintech mortgage lenders show little to no gap in lending terms provided to Black and Hispanic borrowers after adjusting for GSE credit-pricing determinants and loan size . . We take a two-pronged approach to mitigating the problem. "Paired Testing and the 2000 Housing Discrimination Study," Working papers 2002-15, University of Connecticut, Department of Economics. THE MORTGAGE LENDING DECISION AND RACIAL DISCRIMINATION Mortgage lending decisions are primarily financial in nature, or at least are supposed to be. One 2021 Journal of Financial Economics . There are three types of lending discrimination: Overt. When used appropriately, these models can help regulators and researchers uncover discriminatory practices in mortgage lending. Instances of mortgage discrimination occurred in United States inner city neighborhoods from the 1930s . We also find that MLOs offer more details about loans and . Further, the tools used and tested for in this analysis are now readily available for use in future fair lending exams. In 1989, Congress expanded HMDA to require lenders to report key information J Econ Perspect 12:41-62. . Disparate impact, occurring when there is evidence that a lender applies a practice . evidence of discrimination when a lender openly discriminates on a prohibited basis. Using HMDA data along with data from 18 fair lending exams recently conducted by the OCC, between1996 - 2001, we find no evidence of systematic discrimination on the basis of age or gender. Evidence on Discrimination in Mortgage Lending 49. and New York. Although Bank of America recently settled a Justice Department complaint alleging racial discrimination in mortgage lending by its Countrywide subsidiary, underlying issues are far from resolved. First, we an-alyze a data set comprising mortgage overages assessed by loan o cers working for a large mortgage company. Insider logo The word "Insider". . Prepared for the U.S. Department of Housing and Urban Development (HUD) by the Urban Institute, this report provides a comprehensive review and re-analysis of the best available evidence on possible discrimination by mortgage lenders. For example, if a mortgage lender refuses to consider Social Security income for a person with a disability, that would be overt . The Equal Credit Opportunity Act (ECOA) is a federal law preventing lending discrimination based on factors unrelated to a person's ability to repay.

Jan 1999. We use the 2018 and 2019 Home Mortgage Disclosure Act (HMDA) datasets to measure racial bias in residential loan approval across the 20 largest mortgage granting institutions in the U.S. Evidence on Discrimination in Mortgage Lending. Discrimination in mortgage lending: The Home Mortgage Disclosure Act. Race, Ethnicity and Loan Underwriting Outcomes The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) in 1989 expanded the Home Mortgage Disclosure Act (HMDA) data and significantly changed the landscape of research on and supervision meant to prevent mortgage lending discrimination.3 Prior to this time, research on While that figure did climb to 47% later that year, it was still nearly 30 percentage points lower . Equal Credit Opportunity Act prohibits discrimination in mortgage lending, biases still impact many borrowers. First published in 1997, this volume features a wealth of contributions discussing mortgage lending discrimination and the role of the FHA, fair lending enforcement and the Decatur case, along with the future of mortgage discrimination research. Three lending discrimination types. The search for evidence of racial discrimination in economic life is exceedingly difficult but can be made more manageable with the aid of statistical models. I show that discrimination in mortgage lending still persists nowadays, decades after the enactment of HMDA legislation to address the issue. 6 A widely cited example is the policy of minimum mortgage loan amountssetting a dollar limit . Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. DOI: 10.1016/J.JUE.2015.12.004 Corpus ID: 54824745; Discrimination in mortgage lending: Evidence from a correspondence experiment @article{Hanson2016DiscriminationIM, title={Discrimination in mortgage lending: Evidence from a correspondence experiment}, author={Andrew Hanson and Zackary B. Hawley and Hal Martin and Bo Liu}, journal={Journal of Urban Economics}, year={2016}, volume={92 . 16. Based on the legal definition, careful studies of loan denial rates, such as that done by the Federal Reserve Bank of Boston, represent an appropriate method for testing for discrimination by lenders. The Resource Discrimination in home mortgage lending : hearing before the Subcommittee on Consumer and Regulatory Affairs of the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred First Congress, first session, on statistical evidence of discrimination currently available and recommendations for what more needs to be done to eliminate discrimination in home . . Based on the legal definition, careful studies of loan denial rates, such as that done by the Federal Reserve Bank of Boston, represent an appropriate method for testing for discrimination by lenders. Geography of . Example: A lender offered a credit card with a limit of up to $750 for applicants aged 21-30 and $1500 for applicants over 30. Helen F. Ladd, 1998. Because both the FH Act and the ECOA apply to mortgage lending, lenders may not discriminate in mortgage lending based on any of the prohibited factors in either list. As a Also see Ladd (1998), Yinger and Ross (2002), and Ross et al. Discrimination in Mortgage Lending: A Critical Review of the Literature. Policy makers may want to encourage the use of AU, but they shouldn't count on it to eliminate discrimination entirely. Overt Evidence of Disparate Treatment occurs if there is overt evidence of discrimination when a lender openly discriminates on a prohibited basis. J Real Estate Lit 7:15-50. 2 have used the data for their analyses.5 The yearly comparisons of mortgage rejection rates using the . evidence of discrimination by white-owned banks. LADD, DISCRIMINATION IN MORTGAGE LENDING . Disparate impact discrimination occurs when a lending policy, which may appear to be color blind 5 in the way it treats mortgage loan applicants, disqualifies a larger share of minorities than whites but cannot be justified as a business necessity. The evidence and analysis summarized in this report provide persuasive evidence that discrimination in home mortgage lending persists.

Mortgage Lending Discrimination: A Review of Existing Evidence Mortgage Lending Discrimination: A Review of Existing Evidence Mortgage Lending Discrimination: A Review of Existing Evidence The Urban Institute 2100 M Street, N.W. In the 1930s, for instance, Americans of color were routinely denied mortgages. (2008) for a review of the literature on discrimination in mortgage markets in particular.

Downloadable! Black and Hispanic borrowers are more likely to be rejected when they apply for a loan and are more likely to receive a high-cost mortgage. 451-468. Author(s): Helen F. Ladd.

Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Disparate impact. Our results show net discrimination by 1.8% of MLOs through non-response. We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. Published in volume 12, issue 2, pages 41-62 of Journal of Economic Perspectives, Spring 1998, Abstract: Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion. This article surveys the diverse research that examines racial . Using applications data for state-regulated S&L's in California in 1977-78 and for commercial banks, mutual savings banks, and S&L's in New York in 1976-78, Schafer and Ladd estimated a series of models for each of many met- ropolitan areas in each state. First published in 1997, this volume features a wealth of contributions discussing mortgage lending discrimination and the role of the FHA, fair lending enforcement and the Decatur case, along with the future of mortgage discrimination research. This article appeared in the First Quarter 2022 issue of Economic Insights. "It was distressing to find no evidence of reduced discrimination in the . We also find that MLOs offer more details about loans and . The Countrywide complaint was based on statistical evidence of discriminationa strong correlation between race (or Hispanic ethnicity) and loan . A. Michael LaCour-Little. Overt lending discrimination is blatant and typically easy to recognize. Evidence on Discrimination in Mortgage Lending Evidence on Discrimination in Mortgage Lending Ladd, Helen F 1998-05-01 00:00:00 Abstract Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. "It was distressing to find no evidence of reduced discrimination in the mortgage market over the last 35 years," said Quillian, also a faculty fellow with the University's Institute for Policy Research. The Dual Mortgage Market: The Persistence of Discrimination in Mortgage Lending. By focusing on mort- 298-300 (1981) (finding mild support for hypothesis that applicants from older or largely minority neighbor- . Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. There is overt evidence of discrimination even when a lender Although we do not yet have reliable measures of the incidence of discrimination at each stage in the lending process, systematic monitoring and enforcement efforts are clearly justified by existing evidence . Journal of Economic Perspectives (7.3 242 ), 12, 41-62. Article Google Scholar Ladd H (1998) Evidence of discrimination in mortgage lending. Ladd, Helen (1998) " Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives 12(2 ): 41-62. The lenders who originate mortgage loans include de-pository institutions such as commercial banks, mutual savings banks, and savings and loan associations, as well as nondepository . Looking at a sample of conventional fixed-rate mortgages, this paper examines whether lending practices are consistent with the competitive hypothesis that the racial and ethnic composition of the borrower's neighborhood affects the contract rate charged only to the extent that these characteristics objectively influence the probability of the loan defaulting or prepaying. The data set is unique in that it includes three credit scores for each borrower. Data associated with the Home Mortgage Disclosure Act (HMDA) are often studied for evidence of discrimination in terms of minority applicants or for home location in minority neighborhoods, with mixed results.