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Discrimination in mortgage lending: Evidence from a correspondence experiment

Author

Listed:
  • Hanson, Andrew
  • Hawley, Zackary
  • Martin, Hal
  • Liu, Bo

Abstract

We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Our results show net discrimination by 1.8% of MLOs through non-response. We also find that MLOs offer more details about loans and are more likely to send follow up correspondence to whites. The effect of being African American on MLO response is equivalent to the effect of having a credit score that is 71 points lower.

Suggested Citation

  • Hanson, Andrew & Hawley, Zackary & Martin, Hal & Liu, Bo, 2016. "Discrimination in mortgage lending: Evidence from a correspondence experiment," Journal of Urban Economics, Elsevier, vol. 92(C), pages 48-65.
  • Handle: RePEc:eee:juecon:v:92:y:2016:i:c:p:48-65
    DOI: 10.1016/j.jue.2015.12.004
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    References listed on IDEAS

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    Cited by:

    1. Geoffrey Barrows, 2018. "Do Entrepreneurship Policies Work? Evidence From 460 Start-Up Program Competitions Across the Globe," Working Papers 2018.02, FAERE - French Association of Environmental and Resource Economists.
    2. Dean Karlan & Adam Osman & Jonathan Zinman, 2018. "Dangers of a Double-Bottom Line: A Poverty Targeting Experiment Misses Both Targets," NBER Working Papers 24379, National Bureau of Economic Research, Inc.
    3. Adam Nowak & Juan Sayago-Gomez, 2017. "Homeowner Preferences after September 11th, a Microdata Approach," Working Papers 17-03, Department of Economics, West Virginia University.
    4. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2016. "What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders," Working Papers 2016-005, Human Capital and Economic Opportunity Working Group.
    5. repec:eee:juecon:v:102:y:2017:i:c:p:91-105 is not listed on IDEAS
    6. repec:eee:ecoedu:v:60:y:2017:i:c:p:86-96 is not listed on IDEAS
    7. Adji Fatou Diagne & Haydar Kurban & Benoît Schmutz, 2017. "Are Inclusionary Housing Programs Color-blind? The Case of Montgomery County MPDU Program," Working Papers 2017-47, Center for Research in Economics and Statistics.

    More about this item

    Keywords

    Discrimination; Field experiment; Mortgage lending; Race;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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