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Mortgage Lending to Minorities: Where's the Bias?

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Author Info

  • Day, Theodore E
  • Liebowitz, S J

Abstract

This paper examines mortgage lending and concludes that studies based on data created by the Boston Fed should be reevaluated. A detailed examination of these data indicates that irregularities in these data, when combined with the most commonly used research methodology, appear to have biased previous research toward a finding of discrimination against minority applicants. When the most severe data irregularities are eliminated, evidence to support a hypothesis of discrimination disappears. The currently fashionable 'flexible' underwriting standards of mortgage lenders may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies. Copyright 1998 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 36 (1998)
Issue (Month): 1 (January)
Pages: 3-28
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Handle: RePEc:oup:ecinqu:v:36:y:1998:i:1:p:3-28

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Citations

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Cited by:
  1. Judith A. Giles & Marsha J. Courchane, 2000. "Stratified Sample Design for Fair Lending Binary Logit Models," Econometrics Working Papers 0007, Department of Economics, University of Victoria.
  2. Block, Walter & Snow, Nicholas & Stringham, Edward, 2008. "Banks, insurance companies, and discrimination," MPRA Paper 26035, University Library of Munich, Germany.
  3. Timothy Bates, 1999. "Available evidence indicates that black-owned firms are often denied equal access to credit," Proceedings, Federal Reserve Bank of Chicago, issue Mar, pages 267-276.
  4. Raphael W. Bostic & K. Patrick Lampani, 1999. "Racial differences in patterns of small business finance: the importance of local geography," Proceedings, Federal Reserve Bank of Chicago, issue Mar, pages 149-179.
  5. Judith Clarke & Nilanjana Roy & Marsha Courchane, 2009. "On the robustness of racial discrimination findings in mortgage lending studies," Applied Economics, Taylor and Francis Journals, vol. 41(18), pages 2279-2297.
  6. Robert B. Avery, 1999. "Access to credit for minority-owned businesses," Proceedings, Federal Reserve Bank of Chicago, issue Mar, pages 277-284.
  7. Stanley D. Longhofer & Stephen R. Peters, 1998. "Beneath the rhetoric: clarifying the debate on mortgage lending discrimination," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-13.
  8. Jason Dietrich, 2005. "Under-specified Models and Detection of Discrimination: A Case Study of Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 31(1), pages 83-105, August.
  9. Stanley D. Longhofer & Stephen R. Peters, 1998. "Self-selection and discrimination in credit markets," Working Paper 9809, Federal Reserve Bank of Cleveland.
  10. Ken Cyree & Keith Harvey & Michael Melton, 2004. "Bank Lending to Native American Applicants: An Investigation of Mortgage Flows and Government Guarantee Programs on Native American Lands," Journal of Financial Services Research, Springer, vol. 26(1), pages 29-54, August.
  11. Paul S. Calem & Stanley D. Longhofer, 2000. "Anatomy of a fair-lending exam: the uses and limitations of statistics," Finance and Economics Discussion Series 2000-15, Board of Governors of the Federal Reserve System (U.S.).
  12. Cullen Goenner, 2010. "Discrimination and Mortgage Lending in Boston: The Effects of Model Uncertainty," The Journal of Real Estate Finance and Economics, Springer, vol. 40(3), pages 260-285, April.
  13. Ken Cavalluzzo & Linda Cavalluzzo & John Wolken, 1999. "Competition, small business financing, and discrimination: evidence from a new survey," Finance and Economics Discussion Series 1999-25, Board of Governors of the Federal Reserve System (U.S.).
  14. Judith Clarke & Marsha Courchane, 2004. "Implications of Stratified Sampling for Fair Lending Binary Logit Models," The Journal of Real Estate Finance and Economics, Springer, vol. 30(1), pages 5-31, October.
  15. 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.
  16. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer, vol. 40(1), pages 1-27, October.
  17. Paul S. Calem & Stanley D. Longhofer, 2000. "Anatomy of a fair-lending exam: the uses and limitations of statistics," Working Paper 0003R, Federal Reserve Bank of Cleveland.

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