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Anatomy of a fair-lending exam: the uses and limitations of statistics

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  • Paul S. Calem
  • Stanley D. Longhofer

Abstract

In this paper, we consider the role of statistical analysis in fair lending compliance examinations. We present a case study of an actual examination of a large mortgage lender, demonstrating how statistical techniques can be a valuable tool focusing examiner efforts to either uncover illegal discrimination or exonerate an institution so accused. Importantly, our case also highlights the limitations of such statistical techniques. The study suggests that statistical analysis combined with comparative file review offers a balanced and thorough approach to enforcement of fair lending laws.

Suggested Citation

  • Paul S. Calem & Stanley D. Longhofer, 2000. "Anatomy of a fair-lending exam: the uses and limitations of statistics," Finance and Economics Discussion Series 2000-15, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2000-15
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    References listed on IDEAS

    as
    1. Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 3-28, January.
    2. Geoffrey M. B. Tootell, 1993. "Defaults, denials, and discrimination in mortgage lending," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-51.
    3. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    4. Hunter, William C & Walker, Mary Beth, 1996. "The Cultural Affinity Hypothesis and Mortgage Lending Decisions," The Journal of Real Estate Finance and Economics, Springer, vol. 13(1), pages 57-70, July.
    5. Robert Avery & Patricia Beeson & Paul Calem, 1997. "Using HMDA Data as a Regulatory Screen for Fair Lending Compliance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 9-42, February.
    6. Eric Rosenblatt, 1997. "A Reconsideration Of Discrimination In Mortgage Underwriting With Data From A National Mortgage Bank," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 109-131, February.
    7. David Horne, 1997. "Mortgage Lending, Race, and Model Specification," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 43-68, February.
    8. Mitchell Stengel & Dennis Glennon, 1999. "Evaluating Statistical Models of Mortgage Lending Discrimination: A Bank‐Specific Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 299-334, June.
    9. Lynn E. Browne & Geoffrey M. B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
    Full references (including those not matched with items on IDEAS)

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