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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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, Spatial Production Analysis, and Firm Location - - - Government Policy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996.
"Mortgage Lending in Boston: Interpreting HMDA Data,"
American Economic Review,
American Economic Association, vol. 86(1), pages 25-53, March.
- Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
- Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
- Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-92, November.
- Tootell, Geoffrey M B, 1996.
"Redlining in Boston: Do Mortgage Lenders Discriminate against Neighborhoods?,"
The Quarterly Journal of Economics,
MIT Press, vol. 111(4), pages 1049-79, November.
- Geoffrey M. Tootell, 1996. "Redlining in Boston: do mortgage lenders discriminate against neighborhoods?," Working Papers 96-6, Federal Reserve Bank of Boston.
- David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 1998.
"Discrimination in the Small Business Credit Market,"
NBER Working Papers
6840, National Bureau of Economic Research, Inc.
- David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
- Brock,W.A. & Durlauf,S.N., 2000.
"Discrete choice with social interactions,"
7, Wisconsin Madison - Social Systems.
- Michael H. Schill & Susan M. Wachter, . "A Tale of Two Cities: Racial and Ethnic Geographic Disparities in Home Mortgage Lending in Boston and Philadelphia," Rodney L. White Center for Financial Research Working Papers 16-93, Wharton School Rodney L. White Center for Financial Research.
- Holmes, Andrew & Horvitz, Paul, 1994. " Mortgage Redlining: Race, Risk, and Demand," Journal of Finance, American Finance Association, vol. 49(1), pages 81-99, March.
- Schill, Michael H & Wachter, Susan M, 1994.
"Borrower and Neighborhood Racial and Income Characteristics and Financial Institution Mortgage Application Screening,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 9(3), pages 223-39, November.
- Michael H. Schill & Susan M. Wachter, 1994. "Borrower and neighborhood racial and income characteristics and financial institution mortgage application screening," Proceedings, Federal Reserve Bank of Philadelphia, pages 223-243.
- Amemiya, Takeshi, 1974. "Multivariate Regression and Simultaneous Equation Models when the Dependent Variables Are Truncated Normal," Econometrica, Econometric Society, vol. 42(6), pages 999-1012, November.
- Diaz-Serrano, Luis, 2004. "Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU Countries," IZA Discussion Papers 1396, Institute for the Study of Labor (IZA).
- Diaz-Serrano, Luis, 2005. "On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints," Journal of Housing Economics, Elsevier, vol. 14(2), pages 109-126, June.
- Yan Zhang, 2013. "Fair Lending Analysis of Mortgage Pricing: Does Underwriting Matter?," The Journal of Real Estate Finance and Economics, Springer, vol. 46(1), pages 131-151, January.
- Luis Diaz-Serrano, 2005. "Income Volatility and Residential Mortgage Delinquency: Evidence from 12 EU countries," Economics, Finance and Accounting Department Working Paper Series n1530205, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
- Blackburn, McKinley & Vermilyea, Todd, 2007. "The role of information externalities and scale economies in home mortgage lending decisions," Journal of Urban Economics, Elsevier, vol. 61(1), pages 71-85, January.
- Yongheng Deng & Stephen L. Ross & Susan M. Wachter, 2002.
"Racial Differences in Homeownership: The Effect of Residential Location,"
2002-05, University of Connecticut, Department of Economics.
- Deng, Yongheng & Ross, Stephen L. & Wachter, Susan M., 2003. "Racial differences in homeownership: the effect of residential location," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 517-556, September.
- Ruben Hernandez & Michael Owyang & Andra Ghent, 2011. "Race and Subprime Loan Pricing," ERSA conference papers ersa11p923, European Regional Science Association.
- Stephen L. Ross, 2005. "The Continuing Practice and Impact of Discrimination," Working papers 2005-19, University of Connecticut, Department of Economics, revised Jul 2006.
- Diaz-Serrano, Luis, 2005. "Income volatility and residential mortgage delinquency across the EU," Journal of Housing Economics, Elsevier, vol. 14(3), pages 153-177, September.
- Ghent, Andra C. & Hernández-Murillo, Rubén & Owyang, Michael T., 2011. "Differences in subprime loan pricing across races and neighborhoods," Working Papers 2011-033, Federal Reserve Bank of St. Louis, revised 05 Mar 2014.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.