Finance and Economics Discussion Series (FEDS)
January 1997
The Role of Race in Mortgage Lending: Revisiting the Boston Fed Study
Raphael W. Bostic
Abstract:
This paper reexamines claims that non-economic discrimination persists in mortgage loan origination decisions. I find that racial differences in outcomes do exist, as minorities fare worse regarding debt-to-income requirements but better for loan-to-value requirements. Overall, significant racial differentials exist only for "marginal" applicants and are not present for those with higher incomes or those with no credit problems. Thus, the claim that non-economic discrimination is a general phenomenon is refuted. Further, I can say little regarding the existence of discrimination among "marginal" applicants. To conclude that such discrimination exists, one must prove that the observed differences are not due to economic factors.
Full paper (591 KB Postscript)Keywords: Discrimination, mortgages, race, credit risk
PDF: Full Paper
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