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Conference Paper Monday Afternoon Seminar Series

A Comparison of Unexplained Racial Disparities in Bank Level and Market Level Models of Mortgage Lending


Publication date

04 Apr 2005


Statistical models of mortgage lending have been used by both academics and regulators to assess the importance of racial discrimination in lending decisions. Models estimated by bank regulators are specified at a bank level, allowing regulators to focus on possible disparate treatment discrimination against minorities. In contrast, the academic literature has tended to estimate models combining data across many banks, an approach that may not measure any clearly defined concept of discrimination. We find differences between bank-level and market level models to be important, in the sense that the estimated magnitude of unexplained racial disparities increases when a common statistical model for all banks is used.


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