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Patterns in Racial Discrimination in Mortgage Lending

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  • Glenn C. Loury

Abstract

This paper examines two issues of relevance to the general phenomenon of residential segregation in large U.S. cities. The first issue studied is the availability of mortgage credit to prospective home buyers. A national sample of mortgage loan applications and their disposition is studied in order to determine what impact, if any, race has on the availability of mortgage credit. The probability of loan approval is estimated using Berkson-Theil techniques and is found in the aggregate not to differ significantly for white and non-white applicants when relevant financial characteristics are controlled. However, a disaggregative analysis of the data reveals some interesting racial disparities. High income non-white buying expensive homes are found to have a significantly lower probability of being granted a mortgage than their similarly situated white counterparts. Moreover, considerable variation in the racial aspect of lending practices is found both among geographic regions among lending institutions within a given region. Some policy implications of these findings are discussed.

Suggested Citation

  • Glenn C. Loury, 1978. "Patterns in Racial Discrimination in Mortgage Lending," Working Paper 301, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:301
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    Cited by:

    1. David E. Bloom & Beth Preiss & James Trussell, 1983. "Mortgage Lending Discrimination and the Decision to Apply: A Methodological Note," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(1), pages 97-103, March.

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