Advanced Search
MyIDEAS: Login

On the Robustness of Racial Discrimination Findings in Mortgage Lending Studies

Contents:

Author Info

Abstract

The binary logistic regression or logit link model is commonly used to test for racial disparate treatment in fairlending studies undertaken by government agencies, including the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB). Ensuring race neutrality in lending remains a concern of regulators and consumer advocates. Improving the understanding of any shortcomings of either bank internal models or regulatory agency models will enable those participants in the mortgage industry to better serve the needs of consumers. We explore this issue using five bank studies undertaken by the OCC. We consider the impact of the logit link assumption, as this determines how race affects the likelihood of loan approval, by moving to three other links: probit, gompit and complementary log log; the latter two are examples of asymmetric links. As our data sets have been obtained using stratified sampling procedures, which has been typical at the OCC, rather than being drawn via simple random sampling, moving away from the logit link complicates estimation; it is no longer possible to use a standard estimation command with an adjustment for stratum effects. Our results reveal that the choice of link function, despite exhibiting similar sample fit, can influence findings of disparate treatment at the nominal level of significance commonly accepted as the legal standard. We also find that the use of a resampling method, which aims to better approximate the finite sample null distribution, for obtaining p-values typically leads to support for discrimination more often than arises from use of the standard normal approximation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/econometrics/ewp0516.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 0516.

as in new window
Length: 36 pages
Date of creation: 14 Oct 2005
Date of revision:
Handle: RePEc:vic:vicewp:0516

Note: ISSN 1485-6441
Contact details of provider:
Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
Phone: (250)721-6197
Fax: (250)721-6214
Web page: http://web.uvic.ca/econ
More information through EDIRC

Related research

Keywords: Logit; Fair lending; Stratified sampling; Binary response; Semi-parametric maximum likelihood; Pseudo log-likelihood; Profile log-likelihood; Without replacement resampling; Bootstrapping;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Russell Davidson & James G. MacKinnon, 2001. "Bootstrap Tests: How Many Bootstraps?," Working Papers 1036, Queen's University, Department of Economics.
  2. Cosslett, Stephen R, 1981. "Maximum Likelihood Estimator for Choice-Based Samples," Econometrica, Econometric Society, vol. 49(5), pages 1289-1316, September.
  3. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
  4. J. Neuhaus, 2002. "The analysis of retrospective family studies," Biometrika, Biometrika Trust, vol. 89(1), pages 23-37, March.
  5. Stephen L. Ross & John Yinger, 2002. "The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182289, December.
  6. Harrison, Glenn W, 1998. "Mortgage Lending in Boston: A Reconsideration of the Evidence," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 29-38, January.
  7. J.S. Cramer, 1998. "Predictive Performance of the Binary Logit Model in Unbalanced Samples," Tinbergen Institute Discussion Papers 98-085/4, Tinbergen Institute.
  8. Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 3-28, January.
  9. 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.
  10. Mitchell Stengel & Dennis Glennon, 1999. "Evaluating Statistical Models of Mortgage Lending Discrimination: A Bank-Specific Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 299-334.
  11. Lynn Elaine Browne & Geoffrey M.B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
  12. 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.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Anupam Nanda & Stephen L. Ross, 2008. "The Impact of Property Condition Disclosure Laws on Housing Prices: Evidence from an Event Study using Propensity Scores," Working papers 2008-39, University of Connecticut, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:vic:vicewp:0516. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lori Cretney).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.