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Loan Performance and Race

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  • Martin, Robert E
  • Hill, R Carter

Abstract

Recent studies find evidence of racial discrimination in mortgage markets. Although these studies explore loan approval rates for whites versus minorities, they do not specifically consider loan performance, either in the form of default rates or loan administration costs. This study considers discrimination in the used car credit market, where the collateral is not subject to location externalities, collateral value and quality do not vary as much as in real estate, and the loan terms are shorter. We find administration costs and default rates are higher for minorities than for whites, controlling for age, income, home ownership, wealth, occupation, loan terms, and geographic location. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Martin, Robert E & Hill, R Carter, 2000. "Loan Performance and Race," Economic Inquiry, Western Economic Association International, vol. 38(1), pages 136-150, January.
  • Handle: RePEc:oup:ecinqu:v:38:y:2000:i:1:p:136-50
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    References listed on IDEAS

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    Cited by:

    1. Song Han, 2001. "On the Economics of Discrimination in Credit Markets," Finance and Economics Discussion Series 2002-02, Board of Governors of the Federal Reserve System (U.S.).
    2. repec:kap:jfsres:v:52:y:2017:i:3:d:10.1007_s10693-016-0246-1 is not listed on IDEAS
    3. Solomon Y. Deku & Alper Kara & Phil Molyneux, 2014. "Access to Consumer Credit in the UK," Working Papers 14004, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    4. Wendy Edelberg, 2007. "Racial dispersion in consumer credit interest rates," Finance and Economics Discussion Series 2007-28, Board of Governors of the Federal Reserve System (U.S.).
    5. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.

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