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Discrimination, Competition, And Loan Performance In Fha Mortgage Lending

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Author Info
James A. Berkovec
Glenn B. Canner
Stuart A. Gabriel
Timothy H. Hannan

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Abstract

This study tests for the presence of prejudicial or "noneconomic" discrimination on the part of mortgage lenders by evaluating the performance of home mortgage loans. The approach differs from that of previous studies of loan performance in that it is based on the proposition that noneconomic discrimination should be more pronounced in less competitive lending environments, while statistical discrimination should not. Using a rich set of FHA-insured loan records and measures of local market concentration to proxy the competitive environment, we test for the prediction of better loan performance by minority borrowers relative to white borrowers in more concentrated markets. We argue that this approach substantially reduces the potential for omitted-variable bias that has cast a shadow on previous studies of lending discrimination. Results fail to reject the null hypothesis of no noneconomic discrimination. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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File URL: http://www.catchword.com/cgi-bin/cgi?ini=bc&body=linker&reqidx=0034-6535(19980501)80:2L.241;1-
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Publisher Info
Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 80 (1998)
Issue (Month): 2 (May)
Pages: 241-250
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Handle: RePEc:tpr:restat:v:80:y:1998:i:2:p:241-250

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  1. Gary-Bobo, Robert & Larribeau, Sophie, 2002. "A Structural Econometric Model of Price Discrimination in the Mortgage Lending Industry," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Christopher Henderson, 2002. "Asymmetric Information in Community Banking and Its Relationship to Credit-Market Discrimination," American Economic Review, American Economic Association, vol. 92(2), pages 315-319, May. [Downloadable!]
  3. Ladd, Helen F, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring. [Downloadable!] (restricted)
  4. repec:bep:eapcon:v:3:y:2004:i:1:p:1310-1310 is not listed on IDEAS
  5. Gary-Bobo, Robert J. & Larribeau, Sophie, 2003. "The Bank's Market Power and the Interest Rate Elasticity of Demand for Housing: An Econometric Study of Discrimination on French Mortgage Data," CEPR Discussion Papers 3745, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Elizabeth Laderman & Wayne Passmore, 1998. "Is mortgage lending by savings associations special?," Economic Review, Federal Reserve Bank of San Francisco, pages 30-46. [Downloadable!]
    Other versions:
  7. Judith K. Robinson, 2002. "Race, Gender, and Familial Status: Discrimination in One US Mortgage Lending Market," Feminist Economics, Taylor and Francis Journals, vol. 8(2), pages 63-85, July. [Downloadable!] (restricted)
  8. Stephen L. Ross, 2003. "What Is Known about Testing for Discrimination: Lessons Learned by Comparing across Different Markets," Working papers 2003-21, University of Connecticut, Department of Economics, revised Nov 2003. [Downloadable!]
  9. Wendy Edelberg, 2007. "Racial dispersion in consumer credit interest rates," Finance and Economics Discussion Series 2007-28, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  10. Hud – Pd&R, 2005. "A Study of Market Sector Overlap and Mortgage Lending," Economic Development Publications 39044, HUD USER, Economic Development. [Downloadable!]
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