Federal Regulations on Fair Lending and Sexual Orientation Discrimination in the Mortgage Market

65 Pages Posted: 1 May 2023

See all articles by Scott Liao

Scott Liao

University of Toronto - Rotman School of Management

Lulin Song

University of Toronto - Rotman School of Management

Haiwen (Helen) Zhang

University of Minnesota

Date Written: March 28, 2023

Abstract

This study examines whether including sexual orientation as a protected class in federal fair lending regulations mitigates discrimination against same-sex co-borrowers in home mortgages. Relative to mortgages in states with similar protections in state laws, we predict and find that the federal regulatory changes reduce the disparity in mortgage pricing between heterosexual and same-sex co-borrowers in states without state-level protections. We document that this reduction in pricing disparity is only significant for counties with higher gay or lesbian population and for lenders that are more in compliance with existing anti-discrimination laws protecting racial minorities. Supplemental analyses suggest that these results are not driven by changes in borrower credit risk or lender underwriting standards. Collectively, the evidence supports that anti-discrimination fair lending regulations at the federal level mitigate discrimination against same-sex co-borrowers in the mortgage market. Our study contributes to the DEI literature and carries important policy and societal implications.

Keywords: DEI, ESG, Banking, Mortgage, Discrimination, Same-sex, Fair Lending Fair Housing

JEL Classification: D18, G20, J15, R30

Suggested Citation

Liao, Wei-Yi (Scott) and Song, Lulin and Zhang, Haiwen (Helen), Federal Regulations on Fair Lending and Sexual Orientation Discrimination in the Mortgage Market (March 28, 2023). Available at SSRN: https://ssrn.com/abstract=4426726 or http://dx.doi.org/10.2139/ssrn.4426726

Wei-Yi (Scott) Liao (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Lulin Song

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

Haiwen (Helen) Zhang

University of Minnesota ( email )

3-122 Carlson School of Management
321-19th Avenue South
Minneapolis, MN 55455
United States

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