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Racial differences in mortgage denials over the housing cycle: Evidence from U.S. metropolitan areas

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  • Wheeler, Christopher H.
  • Olson, Luke M.

Abstract

The cyclical movement of housing prices likely affects the supply of and demand for credit for home purchases, but little is known about how this process might influence differential access to credit between minority and non-minority borrowers. This paper uses data reported through the Home Mortgage Disclosure Act (HMDA) over the period 1990–2013 to estimate the relationship between annual metropolitan area-level house price inflation and the extent to which Black borrowers are denied relative to ‘comparable’ White borrowers on their loan applications. The results indicate that, on average, Black borrowers are denied more frequently than White borrowers, but this difference in denial rates decreases significantly as house prices rise more rapidly. Such results demonstrate the importance of considering local housing market conditions when using HMDA data to assess lender compliance with fair lending laws.

Suggested Citation

  • Wheeler, Christopher H. & Olson, Luke M., 2015. "Racial differences in mortgage denials over the housing cycle: Evidence from U.S. metropolitan areas," Journal of Housing Economics, Elsevier, vol. 30(C), pages 33-49.
    • Handle: RePEc:eee:jhouse:v:30:y:2015:i:c:p:33-49
    DOI: 10.1016/j.jhe.2015.10.004
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    Cited by:

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    2. Debby Lindsey-Taliefero & Lynne Kelly, 2021. "Reverse Mortgage Lending Disparities and the Economically Vulnerable," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(3), pages 159-169, August.
    3. Michael Bar & Nishanlang Khonglah, 2022. "Racial differences in access to mortgage lending: comparison across major institutions," SN Business & Economics, Springer, vol. 2(8), pages 1-26, August.
    4. Durba Chakrabarty & Michael J. Osei & John V. Winters & Danyang Zhao, 2019. "Which immigrant and minority homeownership rates are gaining ground in the US?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 273-297, April.
    5. Chakrabarty, Durba & Osei, Michael J. & Winters, John V. & Zhao, Danyang, 2017. "Are Immigrant and Minority Homeownership Rates Gaining Ground in the US?," IZA Discussion Papers 10852, Institute of Labor Economics (IZA).
    6. Byeongchan An & Robert M. Bushman & Anya V. Kleymenova & Rimmy E. Tomy, 2022. "Social Externalities of Bank Enforcement Actions: The Case of Minority Lending," Finance and Economics Discussion Series 2022-036, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    Mortgage lending; Fair lending; Discrimination; HMDA;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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