Quantifying Discrimination: Exploring the Role of Race and Gender and the Awarding of Subprime Mortgage Loans

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The recent subprime mortgage crisis has brought to the forefront the possibility of discriminatory lending on the basis of race or gender. Using the over 10 million observations collected by the federal government in 2006 through the Home Mortgage Disclosure Act, this paper explores these claims causally. In so doing, the paper explores two possible theories of discrimination: (1) that any discriminatory lending patterns are picking up the fact that minority borrowers went to different lenders, perhaps as a result of predatory lending, and (2) the possibility that individual lenders discriminated against identically situated borrowers. The results presented provide limited evidence for the idea that borrowers of different races went to different lenders, but only in certain regions of the country and only for certain minority groups. In addition, many of these results are sensitive to missing confounders – e.g., financial data like credit scores and down payments, which the federal government does not collect. Ultimately, the results’ sensitivity suggests that more data gathering is in order before definitive assertions can be made by legal and policy actors.

Last updated on 02/24/2014