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A Tale of Two Cities: Racial and Ethnic Geographic Disparities in Home Mortgage Lending in Boston and Philadelphia

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  • Michael H. Schill
  • Susan M. Wachter

Abstract

Recent data released pursuant to the 1989 amendments to the Home Mortgage Disclosure Act (HMDA) which show large disparities in mortgage lending between minority and non-minority neighborhoods, have refocused the attention of policy makers, lenders, community advocates and academics on possible racial discrimination in the home loan market. In this paper, we review the existing literature on redlining. Many of the methodological shortcomings of the previous studies can be remedied by using post-1989 HMDA data to examine whether lender acceptance or rejection of mortgage applications is related to racial and ethnic neighborhood composition. We test two models of the lender’s decision to accept or reject loan applicants, one including and one without variables that proxy for neighborhood risk using data for Boston and Philadelphia. With proxies for neighborhood risk included, the results do not support the hypothesis that financial institutions redline neighborhoods in these two cities.

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Bibliographic Info

Paper provided by Wharton School Rodney L. White Center for Financial Research in its series Rodney L. White Center for Financial Research Working Papers with number 16-93.

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Handle: RePEc:fth:pennfi:16-93

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Cited by:
  1. Jim Berkovec & Peter Zorn, 1996. "How Complete is HMDA? HMDA Coverage of Freddie Mac Purchases," Journal of Real Estate Research, American Real Estate Society, vol. 11(1), pages 39-56.
  2. 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.
  3. Helen F. Ladd, 1998. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 41-62, Spring.
  4. 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.
  5. Andrew Holmes & Joe F. James, 1996. "Discrimination, Lending Practices and Housing Values: Preliminary Evidence from the Houston Market," Journal of Real Estate Research, American Real Estate Society, vol. 11(1), pages 25-38.
  6. Stephen L. Ross, 2005. "The Continuing Practice and Impact of Discrimination," Working papers 2005-19, University of Connecticut, Department of Economics, revised Jul 2006.
  7. Douglas D. Evanoff & Lewis M. Segal, 1996. "CRA and fair lending regulations: resulting trends in mortgage lending," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 19-46.
  8. HAROLD Black & M. Collins & Ken Cyree, 1997. "Do Black-Owned Banks Discriminate against Black Borrowers?," Journal of Financial Services Research, Springer, vol. 11(1), pages 189-204, February.
  9. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
  10. Fred J. Phillips-Patrick & Clifford V. Rossi, 1996. "Statistical Evidence of Mortgage Redlining? A Cautionary Tale," Journal of Real Estate Research, American Real Estate Society, vol. 11(1), pages 13-24.

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