On the Robustness of Racial Discrimination Findings in Mortgage Lending Studies
The binary logistic regression or logit link model is commonly used to test for racial disparate treatment in fairlending studies undertaken by government agencies, including the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB). Ensuring race neutrality in lending remains a concern of regulators and consumer advocates. Improving the understanding of any shortcomings of either bank internal models or regulatory agency models will enable those participants in the mortgage industry to better serve the needs of consumers. We explore this issue using five bank studies undertaken by the OCC. We consider the impact of the logit link assumption, as this determines how race affects the likelihood of loan approval, by moving to three other links: probit, gompit and complementary log log; the latter two are examples of asymmetric links. As our data sets have been obtained using stratified sampling procedures, which has been typical at the OCC, rather than being drawn via simple random sampling, moving away from the logit link complicates estimation; it is no longer possible to use a standard estimation command with an adjustment for stratum effects. Our results reveal that the choice of link function, despite exhibiting similar sample fit, can influence findings of disparate treatment at the nominal level of significance commonly accepted as the legal standard. We also find that the use of a resampling method, which aims to better approximate the finite sample null distribution, for obtaining p-values typically leads to support for discrimination more often than arises from use of the standard normal approximation.
|Date of creation:||14 Oct 2005|
|Contact details of provider:|| Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2|
Web page: http://web.uvic.ca/econ
More information through EDIRC
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.:
- Harrison, Glenn W, 1998. "Mortgage Lending in Boston: A Reconsideration of the Evidence," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 29-38, January.
- Judith Clarke & Marsha Courchane, 2004. "Implications of Stratified Sampling for Fair Lending Binary Logit Models," The Journal of Real Estate Finance and Economics, Springer, vol. 30(1), pages 5-31, October.
- Cosslett, Stephen R, 1981. "Maximum Likelihood Estimator for Choice-Based Samples," Econometrica, Econometric Society, vol. 49(5), pages 1289-1316, September.
- 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, December.
- Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 3-28, January.
- Russell Davidson & James MacKinnon, 2000.
"Bootstrap tests: how many bootstraps?,"
Taylor & Francis Journals, vol. 19(1), pages 55-68.
- Russell Davidson & James G. MacKinnon, 2001. "Bootstrap Tests: How Many Bootstraps?," Working Papers 1036, Queen's University, Department of Economics.
- 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.
- 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.
- Jason Dietrich, 2005. "Under-specified Models and Detection of Discrimination: A Case Study of Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 31(1), pages 83-105, August.
- Lynn Elaine Browne & Geoffrey M.B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
- J. Neuhaus, 2002. "The analysis of retrospective family studies," Biometrika, Biometrika Trust, vol. 89(1), pages 23-37, March. Full references (including those not matched with items on IDEAS)