Accounting for Racial Differences in Housing Credit Markets

Abstract

This chapter provides a more detailed documentation of racial and neighborhood differences in denial rates than has been available. It presents a brief description of the Home Mortgage Disclosure Act (HMDA) data and summary sample statistics. Most existing studies use census-tract-level or lender-level data collected under the HMDA to infer racial differences. The important point to emphasize is that each of the sources of racial shifts, with very different policy implications, is likely to produce observationally equivalent results. Significant racial differences exist for denial rates on refinance and home improvement loan applications. The chapter focuses on aggregate racial differences in denial rates. Gross denial rate differences are expressed as the sum of components representing differences in applicant characteristics. The chapter examines racial differences in percentage denial rates within and across census tracts, grouped on the basis of average applicant income: high income, middle income and low income; and racial composition: primarily white, mixed, and primarily minority.