The Impact of Minority Representation at Mortgage Lenders

Frame, W. Scott; Huang, Ruidi; Mayer, Erik; Sunderam, Adi

doi:10.3386/w30125

Cited by 14 publications

(14 citation statements)

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“…Loan policies with better protocols, stronger internal governance to monitor adherence, and staff training to enhance understanding of lending policies could expand credit access for minorities by incorporating alternative data and reducing biased lending decisions (Di Maggio, Ratnadiwakara, and Carmichael [2022], Frame et al. [2022], Jiang, Lee, and Liu [2022]). We expect that improvements in loan origination disparities concentrate in subprime areas where borrowers are more likely to have a poor credit history that complicates credit risk assessments.…”

Section: Hypothesis Development and Empirical Resultsmentioning

confidence: 99%

“…To tie the increase in mortgage origination to minorities to changes in organizational capital, we analyze the textual content of enforcement actions to identify EDOs that require implementing improved loan policies, internal governance, and comprehensive employee training, as well as to quantify the extent to which EDOs require such changes. Loan policies with better protocols, stronger internal governance to monitor adherence, and staff training to enhance understanding of lending policies could expand credit access for minorities by incorporating alternative data and reducing biased lending decisions (Di Maggio, Ratnadiwakara, and Carmichael [2022], Frame et al [2022], Jiang, Lee, and Liu [2022]). We expect that improvements in loan origination disparities concentrate in subprime areas where borrowers are more likely to have a poor credit history that complicates credit risk assessments.…”

Section: Measuring Improvements In Organizational Capitalmentioning

confidence: 99%

“…Recent research supports the plausibility of this channel by providing evidence that incorporating alternative data into traditional bank lending models can significantly increase credit access for applicants with low credit scores (Di Maggio, Ratnadiwakara, and Carmichael [2022]). These types of changes may also limit the discretion of individual loan officers to bias lending decisions against minority borrowers (Frame et al [2022], Jiang, Lee, and Liu [2022]).…”

Section: Introductionmentioning

confidence: 99%

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Bank Supervision and Organizational Capital: The Case of Minority Lending

AN,

BUSHMAN,

KLEYMENOVA

et al. 2024

J of Accounting Research

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We investigate whether improvements in banks' organizational capital and control systems facilitate increased loan origination to minority borrowers. We focus on bank supervisors' enforcement decisions and orders (EDOs) against banks and hypothesize that EDO‐imposed improvements in loan policies, internal governance, and employee training mitigate deficiencies in credit assessments and lending decisions that previously disadvantaged minority borrowers. We find that mortgage origination to minority borrowers increases following the resolution of EDOs, and more so for banks with stricter supervisors or more severe EDOs. Using a semisupervised machine learning method to analyze the text of EDOs, we find that such increases are higher for EDOs specifying revisions of loan policies, implementation of formal internal governance procedures, or more employee training. Overall, we find that EDO‐driven improvements in organizational capital generate unintended, positive social externalities that enhance access to credit for minority borrowers.

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Section: Hypothesis Development and Empirical Resultsmentioning

confidence: 99%

Section: Measuring Improvements In Organizational Capitalmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Bank Supervision and Organizational Capital: The Case of Minority Lending

AN,

BUSHMAN,

KLEYMENOVA

et al. 2024

J of Accounting Research

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“…The discrepancy in granted loan amounts and loan forgiveness among racial and ethnic minorities and women may have detrimental implications on business viability. While some studies indicated limited impact on long term outcomes, more evidence reinforces negative impacts within the pattern of lending discrepancy (13)(14)(15). Even when minority and women business owners receive loans, they often come with more restrictive terms and higher rates compared to their white male counterparts (14,(16)(17)(18).…”

Section: Key Results and Interpretationmentioning

confidence: 99%

Paycheck Protection Program (PPP) COVID-19 relief funding for veteran-, minority-, and women- owned dental businesses: A cross-sectional study

Stanko

Boynes²,

Shaver³

et al. 2022

Front. Oral. Health

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BackgroundThe Covid-19 pandemic exacerbated dental staffing shortages, which impact care delivery and ultimately oral health equity. Federal funding efforts like the Paycheck Protection Program (PPP) sought to aid traditionally underserved businesses including those owned by veterans, minority racial and ethnic groups, and women.Objectives(1) To examine differences in PPP funding between veteran- and nonveteran-owned dental care delivery businesses and organizations and (2) to analyze other relevant factors associated with variation in PPP funding levels for dental businesses.MethodsUsing publicly available PPP data, we ran unadjusted bivariable and adjusted multivariable linear regression models to estimate associations between loan approval amount and forgiveness amount, veteran status, and relevant covariates.ResultsMinority racial and ethnic groups and women received less PPP funding and less loan forgiveness, on average, compared with non-minority groups. In the adjusted model with no missing self-reported demographic observations at p < 0.10, veterans received more PPP funding and loan forgiveness, on average, compared to non-veterans.ConclusionTo our knowledge, this is the first comprehensive analysis of all dental recipients of PPP funding throughout the United States. Despite PPP program intentions and strategies, traditionally underserved dental businesses did not receive increased funding to support employment.

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“…For instance, scholars have found an association between gender match and feelings of rapport (Gross et al, 2008), provider recommendations to others (Rogo-Gupta et al, 2018), patient satisfaction and reduced mortality among heart-attack patients (Greenwood et al 2018), and increased benefits receipt in connection with workers' compensation medical examinations (Cabral and Dillender 2022). In additional, our analysis contributes to an even broader literature within economics outside of the health care context exploring the effects of racial and gender concordance between different subjects, such as teacher/pupil (Dee 2004;Dee, 2005;Ehrenburg et al 1995;Bettinger and Long 2005;Fairlie et al, 2014;Lusher et al, 2018), mortgage-applicant/loan office (Frame et al 2022), and others. Riise et al (2022) bridge the health care and education literature and present evidence of an impact of having a female general practitioner on young girls' decisions to pursue STEM in high school and college.…”

Section: Part I: Theoretical Benefits Of Racial Concordance and Liter...mentioning

confidence: 93%