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Mortgage Lending in Chicago and Los Angeles: A Paired Testing Study of the Pre-Application Process

  • Stephen L. Ross

    (University of Connecticut)

  • Margery Austin Turner

    (Metropolitan Housing and Communities Policy Center, Urban Institute)

  • Erin Godfrey

    (New York University)

  • Robin R. Smith

    (Metropolitan Housing and Communities Policy Center, Urban Institute)

This paper analyzes data from a recently completed study of discrimination against African-American and Hispanic homebuyers when they visit mortgage lending institutions in two major metropolitan markets to make pre-application inquiries. It represents the first application of paired testing to rigorously measure discrimination in the mortgage lending process. The paired tests isolated significant levels of differential treatment on the basis of race and ethnicity in Chicago with African Americans and Hispanics receiving less information and assistance than comparable whites. Adverse treatment of African-Americans and Hispanics is also observed in Los Angeles for specific treatments, but the overall pattern of treatment observed did not differ statistically from equal treatment. Multivariate analyses for Chicago indicate that large lenders treat minorities more favorably than small lenders and that lenders with substantial numbers of applications from African-Americans treat African Americans more favorably than lenders with predominantly white application pools.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-03.

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Length: 56 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:uct:uconnp:2005-03
Contact details of provider: Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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  2. 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, June.
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  7. Raphael Bostic, 2003. "A Test of Cultural Affinity in Home Mortgage Lending," Journal of Financial Services Research, Springer, vol. 23(2), pages 89-112, April.
  8. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-21, June.
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  12. Yezer, Anthony M J & Phillips, Robert F & Trost, Robert P, 1994. "Bias in Estimates of Discrimination and Default in Mortgage Lending: The Effects of Simultaneity and Self-Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 197-215, November.
  13. FLACHAIRE, Emmanuel, 1999. "A better way to bootstrap pairs," CORE Discussion Papers 1999024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  15. Calomiris, Charles W & Kahn, Charles M & Longhofer, Stanley D, 1994. "Housing-Finance Intervention and Private Incentives: Helping Minorities and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 634-74, August.
  16. James J. Heckman, 1998. "Detecting Discrimination," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 101-116, Spring.
  17. David Horne, 1997. "Mortgage Lending, Race, and Model Specification," Journal of Financial Services Research, Springer, vol. 11(1), pages 43-68, February.
  18. Kahn, Lawrence M & Sherer, Peter D, 1988. "Racial Differences in Professional Basketball Players' Compensation," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 40-61, January.
  19. 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.
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  23. Jan Ondrich & Stephen Ross & John Yinger, 2003. "Now You See It, Now You Don't: Why Do Real Estate Agents Withhold Available Houses from Black Customers?," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 854-873, November.
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