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Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data

Author

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  • Andrew Hanson
  • Zackary Hawley
  • Hal Martin

Abstract

This paper provides evidence on the relationship between differential treatment of minority borrowers and their mortgage market outcomes. Using data from a field experiment that identifies differential treatment matched to real borrower transactions in the Home Mortgage Disclosure Act (HMDA) data, we estimate difference-in-difference models between African American and white borrowers across lending institutions that display varying degrees of differential treatment. Our results show that African Americans are more likely to be in a high-cost (subprime) loan when borrowing from lenders that are more responsive to them in the field experiment. We also show that net measures of differential treatment are not related to the probability of African American borrowers having a high-cost loan. Our results suggest that differential outcomes are related to within-institution factors, not just across-institution factors like institutional access, as previous studies find.

Suggested Citation

  • Andrew Hanson & Zackary Hawley & Hal Martin, 2017. "Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data," Working Papers (Old Series) 1703, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:1703
    DOI: 10.26509/frbc-wp-201703
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    Cited by:

    1. Nolan Kopkin, 2018. "The conditional spatial correlations between racial prejudice and racial disparities in the market for home loans," Urban Studies, Urban Studies Journal Limited, vol. 55(16), pages 3596-3614, December.
    2. Gaddis, S. Michael, 2018. "An Introduction to Audit Studies in the Social Sciences," SocArXiv e5hfc, Center for Open Science.

    More about this item

    Keywords

    discrimination; mortgage lending; loan outcomes;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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