Redlining, the Community Reinvestment Act, and private mortgage insurance
This paper examines whether neighborhood racial or income composition influences a lender's treatment of mortgage applications. Recent studies have found little evidence of differential treatment based on either the racial or income composition of the neighborhood, once the specification accounts for neighborhood risk factors. This paper suggests that lenders may favor applicants from CRA-protected neighborhoods if they obtain Private Mortgage Insurance (PMI) and that this behavior may mask lender redlining of low income and minority neighborhoods. For loan applicants who are not covered by PMI, this paper finds strong evidence that applications for units in low-income neighborhoods are less likely to be approved, and some evidence that applications for units in minority neighborhoods are less likey to be approved, regardless of the race of the applicant. This pattern is not visible in earlier studies because lenders appear to treat applications from these neighborhoods more favorably when the applicant obtains PMI.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Michael H. Schill & Susan M. Wachter, 1994.
"Borrower and neighborhood racial and income characteristics and financial institution mortgage application screening,"
Federal Reserve Bank of Philadelphia, pages 223-243.
- Schill, Michael H & Wachter, Susan M, 1994. "Borrower and Neighborhood Racial and Income Characteristics and Financial Institution Mortgage Application Screening," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 223-239, November.
- William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 235-260.
- Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
- Michael H. Schill & Susan M. Wachter, "undated". "A Tale of Two Cities: Racial and Ethnic Geographic Disparities in Home Mortgage Lending in Boston and Philadelphia," Rodney L. White Center for Financial Research Working Papers 16-93, Wharton School Rodney L. White Center for Financial Research.
- David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
- 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.
- Holmes, Andrew & Horvitz, Paul, 1994. " Mortgage Redlining: Race, Risk, and Demand," Journal of Finance, American Finance Association, vol. 49(1), pages 81-99, March.
- Cavalluzzo, Ken S & Cavalluzzo, Linda C, 1998. "Market Structure and Discrimination: The Case of Small Businesses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 771-792, November.
- Amemiya, Takeshi, 1974. "Multivariate Regression and Simultaneous Equation Models when the Dependent Variables Are Truncated Normal," Econometrica, Econometric Society, vol. 42(6), pages 999-1012, November.
- 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.
- Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
- Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
- Geoffrey M. B. Tootell, 1996. "Redlining in Boston: Do Mortgage Lenders Discriminate Against Neighborhoods?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1049-1079.
- Geoffrey M. B. Tootell, 1996. "Redlining in Boston: do mortgage lenders discriminate against neighborhoods?," Working Papers 96-6, Federal Reserve Bank of Boston. Full references (including those not matched with items on IDEAS)