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Working Paper
Do Lenders Still Discriminate? A Robust Approach for Assessing Differences in Menus
We use a new methodology to assess mortgage pricing discrimination faced by minority borrowers. We identify a “menu problem” that comes from the multidimensional nature of mortgage pricing: When getting a mortgage, borrowers can choose to avoid closing costs and pay a high interest rate or contribute to closing costs to get a lower rate. While data on both dimensions of mortgage pricing are by now often available, intuitively attractive metrics of lender pricing discrimination used in the literature can lead to both false and contradictory results. For example, it is sometimes observed ...
Report
Stakeholders’ Aversion to Inequality and Bank Lending to Minorities
We document large and persistent cross-sectional differences in banks’ propensity to lend to minorities based on bank stakeholders’ aversion to inequality. Using mortgage application data from the Home Mortgage Disclosure Act, we show that banks with more inequality-averse stakeholders are more likely to approve applications in high-minority relative to low-minority areas and, within census tracts, from non-white borrowers relative to white borrowers. These differences (i) are not driven by applicant selection or loan officer assignment, (ii) coincide with stakeholder alignment, reflected ...