Redlining, the Community Reinvestment Act, and private mortgage insurance
AbstractThis paper examines whether neighborhood racial or income composition influences a lender's treatment of mortgage applications. Recent studies have found little evidence of differential treatment based on either the racial or income composition of the neighborhood, once the specification accounts for neighborhood risk factors. This paper suggests that lenders may favor applicants from CRA-protected neighborhoods if they obtain Private Mortgage Insurance (PMI) and that this behavior may mask lender redlining of low income and minority neighborhoods. For loan applicants who are not covered by PMI, this paper finds strong evidence that applications for units in low-income neighborhoods are less likely to be approved, and some evidence that applications for units in minority neighborhoods are less likey to be approved, regardless of the race of the applicant. This pattern is not visible in earlier studies because lenders appear to treat applications from these neighborhoods more favorably when the applicant obtains PMI.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Urban Economics.
Volume (Year): 55 (2004)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622905
Other versions of this item:
- Stephen L. Ross & Geoffrey M. B. Tootell, 2000. "Redlining, the Community Reinvestment Act, and Private Mortgage Insurance," Working papers 2000-04, University of Connecticut, Department of Economics.
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Government Policy; Regulatory Policy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
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