Keywords: Discrimination, mortgages, race, credit risk
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 (679 KB PDF)
| Full paper (591 KB Postscript)
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Last update: July 16, 1997