MORTGAGE LENDING TO MINORITIES: WHERE'S THE BIAS?

This paper examines mortgage lending and concludes that studies based on data created by the Boston Fed should be reevaluated. A detailed examination of these data indicates that irregularities in these data, when combined with the most commonly used research methodology, appear to have biased previous research toward a finding of discrimination against minority applicants. When the most severe data irregularities are eliminated, evidence to support a hypothesis of discrimination disappears. The currently fashionable “flexible” underwriting standards of mortgage lenders may have the unintended consequences of increasing defaults for the “beneficiaries” of these policies. (JEL J7, G28)