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Application of Reverse Regression to Boston Federal Reserve Data Refutes Claims of Discrimination

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    Abstract

    The topic of mortgage discrimination has received renewed interest since publication of the Boston Federal Reserve Bank study based on 1990 Home Mortgage Disclosure Act data. That study used traditional direct logistic regression to assess the influence of race on the probability of mortgage loan denial and reported the parameter estimate of race to be positive and significantly different from zero across several model specifications, thereby supporting contentions of discriminatory behavior. This paper develops an alternate approach, reverse regression, a method often used in the measurement of gender discrimination in labor markets. After discussion of theoretical issues regarding model choice, results of a reverse regression on the Boston Federal Reserve Bank study dataset are reported. Contrary to results using direct methods, reverse regression does not support contentions of mortgage discrimination in the Boston mortgage market. Rather the lower overall qualifications of minority applicants are likely to account for disparities in application outcomes.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol11n01/v11p001.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 11 (1996)
    Issue (Month): 1 ()
    Pages: 1-12

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    Handle: RePEc:jre:issued:v:11:n:1:1996:p:1-12

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Anthony M.J. Yezer & Robert F. Phillips & Robert P. Trost, 1994. "Bias in estimates of discrimination and default in mortgage lending: the effects of simultaneity and self-selection," Proceedings, Federal Reserve Bank of Philadelphia, pages 197-222.
    2. Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
    3. Arthur S. Goldberger, 1984. "Reverse Regression and Salary Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 293-318.
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    Cited by:
    1. Dawkins, Mark C., 2002. "Simultaneity bias in mortgage lending: A test of simultaneous equations models on bank-specific data," Journal of Banking & Finance, Elsevier, vol. 26(8), pages 1593-1613, August.

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