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The role of specialized lenders in extending mortgages to lower-income and minority homebuyers


  • Glenn B. Canner
  • Elizabeth Laderman
  • Wayne Passmore


Home-purchase lending to lower-income and minority households and neighborhoods has expanded significantly and at a faster rate than lending to other borrowers in recent years. Over the same period, however, an increasing proportion of applicants for conventional home-purchase mortgages, including lower-income and minority applicants, have had their applications denied. The first trend often has been taken as evidence that lenders' efforts to expand credit availability have been successful, whereas the second trend has contributed to concerns about access to credit and the fairness of the lending process. An important but little-recognized force behind the shift of credit toward lower-income and minority borrowers has been a rapid expansion of activity by subprime and manufactured-home lenders, lenders who are oriented toward lower-income and minority households. Using data collected under the Home Mortgage Disclosure Act (HMDA) from 1993 to 1998, this article finds that part of the growth in mortgage lending and most of the increase in denial rates are associated with the substantial and growing share of mortgage activity of institutions that specialize in subprime and manufactured-home lending.

Suggested Citation

  • Glenn B. Canner & Elizabeth Laderman & Wayne Passmore, 1999. "The role of specialized lenders in extending mortgages to lower-income and minority homebuyers," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 85(Nov), pages 709-726, November.
  • Handle: RePEc:fip:fedgrb:y:1999:i:nov:p:709-726:n:v.85no.11
    DOI: 10.17016/bulletin.1999.85-11

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    Cited by:

    1. Karen M. Pence, 2006. "Foreclosing on Opportunity: State Laws and Mortgage Credit," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 177-182, February.
    2. Gary Gorton, 2008. "The panic of 2007," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 131-262.
    3. Sara DeLoughy, 2012. "Risk versus Demographics in Subprime Mortgage Lending: Evidence from Three Connecticut Cities," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 569-587, October.
    4. Gerardi Kristopher & Willen Paul, 2009. "Subprime Mortgages, Foreclosures, and Urban Neighborhoods," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-37, March.
    5. Béchir Bouzid, 2010. "Titrisation des emprunts hypothécaires et bulle immobilière aux États-Unis : les origines d’une débâcle," Revue d'Économie Financière, Programme National Persée, vol. 97(2), pages 101-142.
    6. Robert Pollin & James Heintz, 2013. "Study of U.S. Financial System," FESSUD studies fstudy10, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    7. Stuart A. Gabriel & Stuart S. Rosenthal, 2006. "Secondary Mortgage Markets and Access to Credit: 1992-2002," Working Paper 8569, USC Lusk Center for Real Estate.
    8. Xudong An & Raphael W. Bostic, 2006. "Have the Affordable Housing Goals been a Shield against Subprime? Regulatory Incentives and the Extension of Mortgage Credit," Working Paper 8572, USC Lusk Center for Real Estate.
    9. Raphael W. Bostic & Brian J. Surette, 2004. "Market Forces or CRA-induced Externalities: What Accounts for the Increase in Mortgage Lending to Lower-Income Communities?," Working Paper 8592, USC Lusk Center for Real Estate.
    10. Neil Bhutta, 2008. "Giving credit where credit is due? the Community Reinvestment Act and mortgage lending in lower-income neighborhoods," Finance and Economics Discussion Series 2008-61, Board of Governors of the Federal Reserve System (U.S.).

    More about this item


    Mortgages; Discrimination in mortgage loans;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets


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