The Impact of FinTech on Discrimination in Mortgage Lending

29 Pages Posted: 6 May 2021

See all articles by Daniel Shoag

Daniel Shoag

Case Western Reserve University

Date Written: May 2021


The mortgage market has historically been plagued by racial discrimination, and recent data show ongoing disparities in the terms offered to minority borrowers by traditional lenders. The mortgage market has changed rapidly in the past decade, however, due to the rise of technology-based (FinTech) lenders. In this paper, I show that FinTech lenders show little to no gap in the terms provided to Black and Hispanic borrowers after adjusting for GSE credit-risk pricing determinants and loan size. This fact is shown using proprietary data on borrowers to better study racial bias and FinTech loans. The paper further shows that, in a matched analysis of observationally similar Black and Hispanic and non-Black or Hispanic borrowers, FinTech lenders provide statistically indistinguishable terms to the two groups. This stands in sharp contrast to the large discrepancies found under identical tests for traditional lenders. This matched analysis, wherein borrowers with similar characteristics such as income and age are compared, is supported by an analysis of preference and shopping heterogeneity in the National Survey of Mortgage Originations. Finally, I show that FinTech penetration in a region had consequences on legacy lender terms as well. Greater FinTech penetration in a zip code is associated with smaller discrepancies even among legacy lenders.

Keywords: FinTech, Mortgages, Discrimination

JEL Classification: G21, G28, G23, J14, K22, K23, R30

Suggested Citation

Shoag, Daniel, The Impact of FinTech on Discrimination in Mortgage Lending (May 2021). Available at SSRN: or

Daniel Shoag (Contact Author)

Case Western Reserve University

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