Social Movement and Racial Discrimination in Mortgage Lending

51 Pages Posted: 9 Aug 2023 Last revised: 30 Aug 2023

See all articles by Scott Liao

Scott Liao

University of Toronto - Rotman School of Management

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management

Ethan Yao

Neoma Business School; University of Minnesota

Haiwen (Helen) Zhang

University of Minnesota

Date Written: August 7, 2023

Abstract

This paper examines the effect of the Black Lives Matter (BLM) movement in mitigating racial discrimination in mortgage lending. We first validate that BLM protests are associated with increased awareness and reckoning of racial inequality by local residents. From a sample of mortgage loans guaranteed by Government Sponsored Enterprises (GSEs), we next find the gap in mortgage interest rates between Black and White borrowers declines significantly after occurrences of BLM protests in the treated counties, compared to the matched control counties, in which no protests occurred. We further document that banks are less likely to close branches in Black neighborhoods after the BLM protests in the treated counties. These findings cannot be explained by changes in Black borrowers’ creditworthiness or lenders’ overall underwriting standards. Our collective evidence suggests that social awakening to racial justice mitigates price discrimination in mortgage lending.

Keywords: DEI, Banking, Mortgage, Discrimination, Black Lives Matter

JEL Classification: G21, G18,

Suggested Citation

Liao, Wei-Yi (Scott) and Wang, Tracy Yue and Yao, Ethan and Zhang, Haiwen (Helen), Social Movement and Racial Discrimination in Mortgage Lending (August 7, 2023). Available at SSRN: https://ssrn.com/abstract=4534146 or http://dx.doi.org/10.2139/ssrn.4534146

Wei-Yi (Scott) Liao (Contact Author)

University of Toronto - Rotman School of Management ( email )

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

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Ethan Yao

Neoma Business School ( email )

1 Rue du Maréchal Juin
Mont Saint Aignan Cedex, 76825
France

University of Minnesota ( email )

321 Nineteenth Avenue, South
Suite 3-122
Minneapolis, MN 55455
United States

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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