IDEAS home Printed from https://ideas.repec.org/p/vic/vicewp/0604.html
   My bibliography  Save this paper

On the Robustness of Racial Disrcimination Findings in Motgage Lending Studies

Author

Abstract

That mortgage lenders have complex underwriting standards, often differing legitimately from one lender to another, implies that any statistical model estimated to approximate these standards, for use in fair lending determinations, must be misspecified. Exploration of the sensitivity of disparate treatment findings from such statistical models is, thus, imperative. We contribute to this goal. This paper examines whether conclusions from several bank-specific studies, undertaken by the Office of the Comptroller of the Currency, are robust to changes in the link function adopted to model the probability of loan approval and to the approach used to approximate the finite sample null distribution for the disparate treatment hypothesis test. We find that discrimination findings are reasonably robust to the range of examined link functions, which supports the current use of the logit link. Based on several features of our results, we advocate regular use of a resampling method to determine p-values.

Suggested Citation

  • Judith A. Clarke & Nilanjana Roy & Marsha J. Courchane, 2006. "On the Robustness of Racial Disrcimination Findings in Motgage Lending Studies," Econometrics Working Papers 0604, Department of Economics, University of Victoria.
  • Handle: RePEc:vic:vicewp:0604 Note: ISSN 1485-6441
    as

    Download full text from publisher

    File URL: http://www.uvic.ca/socialsciences/economics/assets/docs/econometrics/ewp0604.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Jason Dietrich, 2005. "The effects of sampling strategies on the small sample properties of the logit estimator," Journal of Applied Statistics, Taylor & Francis Journals, vol. 32(6), pages 543-554.
    3. Russell Davidson & James MacKinnon, 2000. "Bootstrap tests: how many bootstraps?," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 55-68.
    4. 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.
    5. Kennedy, Peter E, 2002. " Sinning in the Basement: What Are the Rules? The Ten Commandments of Applied Econometrics," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 569-589, September.
    6. Blackburn, McKinley L. & Vermilyea, Todd, 2004. "Racial disparities in bank-specific mortgage lending models," Economics Letters, Elsevier, vol. 85(3), pages 379-383, December.
    7. Calem, Paul S & Longhofer, Stanley D, 2002. "Anatomy of a Fair Lending Exam: The Uses and Limitations of Statistics," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 207-237, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Logit; Mortgage lending discrimination; Fair lending; Stratified sampling; Binary response; Semiparametric maximum likelihood; Pseudo log-likelihood; Profile log-likelihood; Bootstrapping;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vic:vicewp:0604. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Graham Voss). General contact details of provider: http://edirc.repec.org/data/devicca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.