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Working Paper
Social Capital and Mortgages
Using comprehensive mortgage-level data, we discover that the social capital of the community in which households live positively influences the likelihood of the approval of their mortgage applications, the terms of approved mortgages, and the subsequent performance of those mortgages. The results hold when conditioning on extensive household and community characteristics and a battery of fixed effects, including individual effects, data permitting, and when employing instrumental variables and propensity score matching to address identification and selection concerns. Concerning causal ...
Working Paper
How Much Does Racial Bias Affect Mortgage Lending? Evidence from Human and Algorithmic Credit Decisions
We assess racial discrimination in mortgage approvals using confidential data on mortgage applications. Minority applicants tend to have significantly lower credit scores, higher leverage, and are less likely than White applicants to receive algorithmic approval from raceblind government-automated underwriting systems (AUS). Observable applicant-risk factors explain most of the racial disparities in lender denials. Further, we exploit the AUS data to show there are risk factors we do not directly observe, and our analysis indicates that these factors explain at least some of the residual 1-2 ...