Discrimination, Competition, and Loan Performance in FHA Mortgage Lending

Explaining the route to owner-occupation: A transatlantic comparison

“…10 A possible explanation is the exclusion in many empirical models of economic factors that are difficult to measure, such as Black and Hispanic households having less job security or less tolerance toward risk. There also is the possibility that discrimination against minorities exists in mortgage lending (Munnell et al, 1996;Berkovec et al, 1998) or by real estate brokers (Ross and Yinger, 2002). Alternatively, the lower ownership rates could reflect ethnic minorities having their access restricted to certain locations, particularly in suburban neighborhoods.…”

Access to consumer credit in the UK

“…However, we need to bear in mind the (typical) limitations of the above analysis. While doing our best to control for a wide range of factors that explain access to credit services, it could be that our analysis is subject to the criticism of omitted variable bias (Berkovec et al, 1998;Pager and Shepherd, 2008;Han, 2011). This is because a large number of social, economic, and cultural differences may be correlated with racial differences and their omission could bias our results.…”

“…Smaller, yet adverse, pricing differentials for minority mortgages are found in Black et al (2003), Courchane and Nickerson (1997) and Crawford and Rosenblatt (1999), although these higher rates may be counteracted with more favourable terms (longer low rate lock-ins) elsewhere (Crawford and Rosenblatt 1999). Mortgage default rates may also be higher (Berkovec et al, 1996) or no different (Berkovec et al, 1998) 3 . Han (2011) develops a model of creditor learning and, using the mortgage market data of Munnell et al (1996), finds that racial disparity in mortgage approval rates falls substantially for blacks the longer their credit history.…”

A multidisciplinary survey on discrimination analysis

“…A higher likelihood of default for black householders was found, which then justifies higher credit denial or interest rates. A refined study, accounting for the market concentration of lenders, is reported by Berkovec et al (1998). The recent paper by Brown and Simpson (2010) reviews the role of default rates in mortgage discrimination research, and conducts a simulation analysis to compare the performance of reverse regression (used by LaCour-Little (1996)) versus the commonly-adopted logit regression models.…”