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

28 Pages Posted: 5 Apr 2017

See all articles by Andrew Hanson

Andrew Hanson

Marquette University- Department of Economics

Zackary Hawley

Texas Christian University

Hal Martin

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: March 27, 2017

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.

Keywords: Discrimination, Mortgage Lending, Loan Outcomes

JEL Classification: G2, J15

Suggested Citation

Hanson, Andrew and Hawley, Zackary and Martin, Hal, Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data (March 27, 2017). FRB of Cleveland Working Paper No. 17-03. Available at SSRN: https://ssrn.com/abstract=2945493

Andrew Hanson (Contact Author)

Marquette University- Department of Economics ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Zackary Hawley

Texas Christian University ( email )

Fort Worth, TX 76129
United States

HOME PAGE: http://https://sites.google.com/site/zackaryhawley/

Hal Martin

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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