J Econ Perspect 12:41-62.

Published in volume 12, issue 2, pages 41-62 of Journal of Economic Perspectives, Spring 1998, Abstract: Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion. . By focusing on mort- 2002. Yes, we've come a long way in the nearly nine decades since then, but there is convincing evidence that discrimination in mortgage lending still exists. Evidence on Discrimination in Mortgage Lending. In the 1930s, for instance, Americans of color were routinely denied mortgages. Evidence on Discrimination in Mortgage Lending Helen F. Ladd T he ability to get a mortgage is often the key to an individual's ability to purchase a home. Evidence on Discrimination in Mortgage Lending 49. and New York. Example: A lender offered a credit card with a limit of up to $750 for applicants aged 21-30 and $1500 for applicants over 30. Lending Discrimination Statutes and Regulations (1) The ECOA prohibits discrimination in any aspect of a credit transaction. Instances of mortgage discrimination occurred in United States inner city neighborhoods from the 1930s . "It was distressing to find no evidence of reduced discrimination in the . Although the U.S. Policy makers may want to encourage the use of AU, but they shouldn't count on it to eliminate discrimination entirely. In 1989, Congress expanded HMDA to require lenders to report key information (2008) for a review of the literature on discrimination in mortgage markets in particular. We also find that MLOs offer more details about loans and . Several methods were used, the worst of which was redlining (denial of a loan based on the applicant's address). Overt discrimination exists when a lender openly treats an applicant differently on a prohibited basis. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Equal Credit Opportunity Act prohibits discrimination in mortgage lending, biases still impact many borrowers. The two principal laws forbidding housing and lending discrimination are the 1968 Fair Housing Act and the 1974 Equal Credit Opportunity Act. which leave any evidence of discrimination open to interpretation. May 1998; Journal of Economic Perspectives 12(2):41-62; . Disparate treatment. Liddell, Francis Douglass Kelly (1983) "Simplified exact analysis of .

mortgage, tend to receive less generous loan amounts and terms. Author(s): Helen F. Ladd. Also see Ladd (1998), Yinger and Ross (2002), and Ross et al. Evidence on Discrimination in Mortgage Lending Helen F. Ladd he ability to get a mortgage is often the key to an individual's ability to purchase a home.

For example, if a mortgage lender refuses to consider Social Security income for a person with a disability, that would be overt . . "Use of Statistical Models to Provide Statistical Evidence of Discrimination in the Treatment of Mortgage Loan Applicants: A Study of One Lending Institution." In Mortgage Lending, Racial Discrimination, and Federal Policy , edited by John Goering and Ron Wienk (Washington, D.C.: Urban Institute Press), pp. Overt lending discrimination is blatant and typically easy to recognize. 298-300 (1981) (finding mild support for hypothesis that applicants from older or largely minority neighbor- . First published in 1997, this volume features a wealth of contributions discussing mortgage lending discrimination and the role of the FHA, fair lending enforcement and the Decatur case, along with the future of mortgage discrimination research. This key civil rights debate in the wake of the Fair Housing Act 25 years prior is evaluated and clarified through rigorous review of fair lending .

This article appeared in the First Quarter 2022 issue of Economic Insights. Because both the FH Act and the ECOA apply to mortgage lending, lenders may not discriminate in mortgage lending based on any of the prohibited factors in either list.

Although we find the empirical evidence on lending discrimination to be inconclusive, most of what is available suggests that minorities are discrimi-nated against when they seek residential . But, this logic cuts both ways: if differences in average credit quality explain differences in denial rates, then equal default rates imply discrimination against the minority population.

The Mortgage Market and the Definition of Mortgage Lending Discrimination. The lenders who originate mortgage loans include de-pository institutions such as commercial banks, mutual savings banks, and savings and loan associations, as well as nondepository . Based on the legal definition, careful studies of loan denial rates, such as that done by the . 6

First published in 1997, this volume features a wealth of contributions discussing mortgage lending discrimination and the role of the FHA, fair lending enforcement and the Decatur case, along with the future of mortgage discrimination research.

Race, Ethnicity and Loan Underwriting Outcomes The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) in 1989 expanded the Home Mortgage Disclosure Act (HMDA) data and significantly changed the landscape of research on and supervision meant to prevent mortgage lending discrimination.3 Prior to this time, research on .

Section I of the article outlines a simple model of bank lending and examines two popular claims made about lending discrimination. Prepared for the U.S. Department of Housing and Urban Development (HUD) by the Urban Institute, this report provides a comprehensive review and re-analysis of the best available evidence on possible discrimination by mortgage lenders. Journal of Economic Perspectives (7.3 242 ), 12, 41-62. We take a two-pronged approach to mitigating the problem. Established in 1962, the MIT Press is one of the largest and most distinguished university presses in the world and a leading publisher of books and journals at the intersection of science, technology, art, social science, and design. The evidence, however, was ind

Ladd, Helen (1998) " Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives 12(2 ): 41-62. One 2021 Journal of Financial Economics . Although we do not yet have reliable measures of the incidence of discrimination at each stage in the lending process, systematic monitoring and enforcement efforts are clearly justified by existing evidence . We compare mortgage lenders' credit decisions to algorithmic recommendations - on the same set of loan applications - from widely used Automated Underwriting Systems (AUS) to assess discrimination. Although these data did show that substantially fewer mortgage loans were originated in census tracts with a high proportion of minorities, they did not (and were intended to) provide evidence of discrimination against individual applicants. Article Google Scholar Ladd H (1998) Evidence of discrimination in mortgage lending.

6 A widely cited example is the policy of minimum mortgage loan amountssetting a dollar limit . An alphabet soup of federal agencies can refer evidence of violations of these laws to HUD or the justice department for investigation, but referrals have dropped precipitously over the past decade. The Resource Discrimination in home mortgage lending : hearing before the Subcommittee on Consumer and Regulatory Affairs of the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred First Congress, first session, on statistical evidence of discrimination currently available and recommendations for what more needs to be done to eliminate discrimination in home . For example, a woman on maternity leave sued a credit union for discrimination based on sex and familial status for rejecting her home renovation loan because they would not consider her income until she returned to work. Helen F. Ladd, 1998. DOI: 10.1016/J.JUE.2015.12.004 Corpus ID: 54824745; Discrimination in mortgage lending: Evidence from a correspondence experiment @article{Hanson2016DiscriminationIM, title={Discrimination in mortgage lending: Evidence from a correspondence experiment}, author={Andrew Hanson and Zackary B. Hawley and Hal Martin and Bo Liu}, journal={Journal of Urban Economics}, year={2016}, volume={92 . Disparate impact, occurring when there is evidence that a lender applies a practice . Using HMDA data along with data from 18 fair lending exams recently conducted by the OCC, between1996 - 2001, we find no evidence of systematic discrimination on the basis of age or gender. Our results . The Dual Mortgage Market: The Persistence of Discrimination in Mortgage Lending. We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. When used appropriately, these models can help regulators and researchers uncover discriminatory practices in mortgage lending. Using applications data for state-regulated S&L's in California in 1977-78 and for commercial banks, mutual savings banks, and S&L's in New York in 1976-78, Schafer and Ladd estimated a series of models for each of many met- ropolitan areas in each state. Evidence on Discrimination in Mortgage Lending by Helen F. Ladd. In 2018-19, lenders were more likely to deny minority applicants than non-Hispanic white applicants. Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. Overt Evidence of Disparate Treatment occurs if there is overt evidence of discrimination when a lender openly discriminates on a prohibited basis. mortgage loans. The qualitative evidence suggests that loan originators often gained the confidence of potential borrowers through the manipulation of trusted co-ethnic intermediaries in community service organizations and churches.

AB - We examine trends in racial and ethnic discrimination in U.S. housing and mortgage lending markets through a quantitative review of studies. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Geography of . While Ferguson and Peters (2000) explain that discrimination may persist indefinitely even in competitive markets when discrimination is not costly to the lender, Michell and Pearce (2011) provide some evidence that the types of lenders that enter a market can influence the extent to which competition drives down discrimination. While that figure did climb to 47% later that year, it was still nearly 30 percentage points lower .

2 have used the data for their analyses.5 The yearly comparisons of mortgage rejection rates using the .

Our results show net discrimination by 1.8% of MLOs through non-response. Based on the legal definition, careful studies of loan denial rates, such as that done by the . The present analysisutilizesadataset covering2014-2016,combining characteristics of home location and applicants from the While it has been nearly a century since redlining was commonplace, there's no doubt that its detrimental effects are still felt today. I show that discrimination in mortgage lending still persists nowadays, decades after the enactment of HMDA legislation to address the issue. The lenders who originate mortgage loans include de-pository institutions such as commercial banks, mutual savings banks, and savings and loan associations, as well as nondepository . Discrimination in mortgage lending: Evidence from a correspondence experiment . The National Community Reinvestment Coalition ()which is made up of "community reinvestment organizations; community development corporations; local and state government agencies; faith-based institutions; community organizing and civil rights groups; minority and women . Stephen Ross, 2002. . The Countrywide complaint was based on statistical evidence of discriminationa strong correlation between race (or Hispanic ethnicity) and loan . We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans. Recent studies have used statistical methods to show that minorities were more likely than equally qualified whites to receive high cost, high risk loans during the U.S. housing boom, evidence taken to suggest widespread discrimination in the mortgage lending industry. This article explores new data and statistical techniques, finding that AU seems to reduce but not eliminate discrimination in the mortgage markets. There are three types of lending discrimination: Overt. With the final version of this paper recently published in one of the most respected academic journals in the economics profession, we can now look back on the debate over the presence of discrimination in mortgage lending to see what we have learned.

Article Google Scholar t. e. Mortgage discrimination or mortgage lending discrimination is the practice of banks, governments or other lending institutions denying loans to one or more groups of people primarily on the basis of race, ethnic origin, sex or religion. Based on the legal definition, careful studies of loan denial rates, such as that done by the Federal Reserve Bank of Boston, represent an appropriate method for testing for discrimination by lenders. After all, Black homeownership reached a record-low of 40.6% in 2020. Although Bank of America recently settled a Justice Department complaint alleging racial discrimination in mortgage lending by its Countrywide subsidiary, underlying issues are far from resolved. 16. In: Briggs X, editor.

A. Three lending discrimination types. Black and Hispanic borrowers are more likely to be rejected when they apply for a loan and are more likely to receive a high-cost mortgage. evidence of discrimination. See Smith and Delair (1999) for a summary of early evidence on discrimination by mortgage lenders from a sample of enforcement-based in-person audits which covers five US cities. Source: Second, I show that the relationship between discrimination and business cycles is pro-cyclical, documenting the peak of discrimination during times of recession. Third, I show the substantial Discrimination in Mortgage Lending: A Critical Review of the Literature. evidence of discrimination by white-owned banks.

0. We use the 2018 and 2019 Home Mortgage Disclosure Act (HMDA) datasets to measure racial bias in residential loan approval across the 20 largest mortgage granting institutions in the U.S. The evidence, however, was indirect, being inferred from racial . We code and analyze as a time series results from 16 field experiments of housing discrimination and 19 observational studies of mortgage lending discrimination.

12(2), pages 41-62, Spring. As a LADD, DISCRIMINATION IN MORTGAGE LENDING . There is overt evidence of discrimination even when a lender J R Estate Lit. We design and implement an experimental test for differential response by mortgage loan originators (MLOs) to requests for information about loans.

The Equal Credit Opportunity Act (ECOA) is a federal law preventing lending discrimination based on factors unrelated to a person's ability to repay. 451-468.

Disparate impact. The study, "Racial Discrimination in the U.S. Housing and Mortgage Lending Markets: A Quantitative Review of Trends, 1976-2016," found Black borrowers are more likely to be rejected when they apply for a loan and are more likely to receive a high-cost mortgage. Mortgage lending discrimination today. Evidence on Discrimination in Mortgage Lending. The search for evidence of racial discrimination in economic life is exceedingly difficult but can be made more manageable with the aid of statistical models.

Discrimination in mortgage lending: The Home Mortgage Disclosure Act. Racial discrimination in lending hasn't stopped since the 1968 Fair Housing Act, but there are a few ways to ensure a lender can't deny you.

THE MORTGAGE LENDING DECISION AND RACIAL DISCRIMINATION Mortgage lending decisions are primarily financial in nature, or at least are supposed to be. J Real Estate Lit 7:15-50. This policy violated the ECOA's prohibition on discrimination based on age. "It was distressing to find no evidence of reduced discrimination in the mortgage market over the last 35 years," said Quillian, also a faculty fellow with the University's Institute for Policy Research. Washington, D.C. 20037 Phone: 202.833.7200 Fax: 202.429.0687 E-Mail: paffairs@ui.urban.org 5. Insider logo The word "Insider". Evidence on Discrimination in Mortgage Lending Evidence on Discrimination in Mortgage Lending Ladd, Helen F 1998-05-01 00:00:00 Abstract Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. Mortgage Lending Discrimination: A Review of Existing Evidence Mortgage Lending Discrimination: A Review of Existing Evidence Mortgage Lending Discrimination: A Review of Existing Evidence The Urban Institute 2100 M Street, N.W. A. DOI: 10.3390/make4010011. Overt Evidence of Discrimination. Our results show net discrimination by 1.8% of MLOs through non-response. 3.

The evidence and analysis summarized in this report provide persuasive evidence that discrimination in home mortgage lending persists. Mortgage Lending Bias: The Evidence . Data associated with the Home Mortgage Disclosure Act (HMDA) are often studied for evidence of discrimination in terms of minority applicants or for home location in minority neighborhoods, with mixed results. Looking at a sample of conventional fixed-rate mortgages, this paper examines whether lending practices are consistent with the competitive hypothesis that the racial and ethnic composition of the borrower's neighborhood affects the contract rate charged only to the extent that these characteristics objectively influence the probability of the loan defaulting or prepaying. https://sites.google.com/view/vinegarhill-datalabs/data-transformation-and-visualization/tidyverse-r/boston-hmdaVarian (2014) revisits the classic mortgage l. "Evidence on Discrimination in Mortgage Lending," Journal of Economic Perspectives, American Economic Association, vol. "Paired Testing and the 2000 Housing Discrimination Study," Working papers 2002-15, University of Connecticut, Department of Economics. 21646819. Recent studies have used statistical methods to show that minorities were more likely than equally qualified whites to receive high-cost, high-risk loans during the U.S. housing boom, evidence taken to suggest widespread discrimination in the mortgage lending industry. Our e-mail correspondence experiment is designed to analyze differential treatment by client race and credit score. Disparate impact discrimination occurs when a lending policy, which may appear to be color blind 5 in the way it treats mortgage loan applicants, disqualifies a larger share of minorities than whites but cannot be justified as a business necessity.

1982. Based on the legal definition, careful studies of loan denial rates, such as that done by the Federal Reserve Bank of Boston, represent an appropriate method for testing for discrimination by lenders. Further, the tools used and tested for in this analysis are now readily available for use in future fair lending exams.

Daily Kos, June 17, 2022, Discrimination in mortgage lending persists due to Trump.Now Biden's working to combat it.

Overt evidence of discrimination, which occurs when a lender blatantly discriminates on a prohibited basis; 2. Michael LaCour-Little. Evidence on Discrimination in Mortgage Lending. Disparate treatment, which occurs when there is evidence that a lender treats applicants differently based on one of the prohibited facts; and. 1.

Article.

First, we an-alyze a data set comprising mortgage overages assessed by loan o cers working for a large mortgage company. The data set is unique in that it includes three credit scores for each borrower. This article surveys the diverse research that examines racial . Overt Discrimination. evidence of discrimination when a lender openly discriminates on a prohibited basis.

2 Origin of the Debate In 197 5, the Home Mortgage Disclosure Act (HMDA) was passed with .

Evidence on Discrimination in Mortgage Lending Evidence on Discrimination in Mortgage Lending Ladd, Helen F 1998-05-01 00:00:00 Abstract Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. Much of the controversy about whether mortgage lenders discriminate against minorities can be explained in terms of the confusion about how to define discrimination. Downloadable!

. An example of overt evidence of disparate treatment would be if a lender offered a mortgage with a limit of up to 80% LTV for applicants aged 21-30 and 95% LTV for applicants over 30 who had the . After a long history of well-known racial discrimination and unequal outcomes from traditional lenders in the market, academic researchers have provided evidence that Fintech mortgage lenders show little to no gap in lending terms provided to Black and Hispanic borrowers after adjusting for GSE credit-pricing determinants and loan size . Jan 1999. LaCour-Little M (1999) Discrimination in mortgage lending: a critical review of the literature. We also find that MLOs offer more details about loans and . This key civil rights debate in the wake of the Fair Housing Act 25 years prior is evaluated and clarified through rigorous review of fair lending .