Fair Lending Analysis of Mortgage Pricing: Does Underwriting Matter?
AbstractThis paper evaluates the impact of underwriting decision on fair lending risk assessments of loan pricing. Using data from one national bank that contain a rich set of decisioning variables, we compare the estimation results from the single equation model with those from the sample selection type of models. Then we conduct three simulation studies to evaluate the sample selection bias and omitted variable bias under various scenarios. We demonstrate that the single equation approach could potentially generate biased estimates of pricing disparities when it fails to consider the impact of the underwriting decision. Copyright Springer Science+Business Media, LLC (outside the USA) 2013
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Bibliographic InfoArticle provided by Springer in its journal The Journal of Real Estate Finance and Economics.
Volume (Year): 46 (2013)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=102945
Underwriting; Pricing; Fair lending analysis; Pricing disparities; Sample selection bias; Omitted variable bias;
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