The Role of Income and Location in Racial/Ethnic Differences on Loan Denial in three Mississippi Counties

Abstract

The Role of Income and Location in Racial/Ethnic Differences on Loan Denial in three Mississippi Counties Okechukwu Anyamele, Gail Fulgham, Jean-Claude Assad Abstract This paper investigates the racial differences in loan denial rates in three Mississippi counties within the Jackson Metropolitan statistical area (MSA). The study examines the role of location, minority population of location, and the ratio of loan amount to income on loan denial rates. The study uses Home Mortgage Disclosure Data (HMDA) from 2007 to 2013 to capture the effects of the recent financial crisis on loan denial rates. The results show that the ratio of loan amounts to income is a significant determinant in loan denial rates. Moreover, residents in Rankin County are more likely to be denied loans than residents in Hinds and Madison counties over the study period. Residents in high minority population area are more likely to be denied loans than residents in low minority population areas. The researchers employed both logistic regression and Blinder-Oaxaca decomposition analysis. The results showed that 28.89% of the difference in loan denial rates between whites and African Americans is explained by endowments, while 64.94% is unexplained. Similarly, 12.87% of the difference in loan denial rates between Hispanics and Whites is explained by endowments, while 86.91% is unexplained. Full Text: PDF DOI: 10.15640/jeds.v5n3a1