Do Lenders Still Discriminate? A Robust Approach for Assessing Differences in Menus
Abstract/Contents
- Abstract
- Motivated by the assessment of racial discrimination in mortgage pricing, we introduce a new methodology for comparing the menus of options borrowers face based on their choices. First, we show how standard regression based approaches for assessing discrimination in menus can lead to misleading and contradictory results. Second, we propose a new methodology that is robust these problems based on relatively weak economic assumptions. More specifically, we use pairwise dominance relationships in choices supplemented by restrictions on the range of plausible menus to define (1) a test statistic for equality in menus and (2) a difference in menus (DIM) metric for assessing whether one group of borrowers would prefer to switch to another group’s menus. Our statistics are robust to arbitrary heterogeneity in borrower preferences across racial groups, are sharp in terms of identification, and can be efficiently computed using Optimal Transport methods. Third, we devise a new approach for inference on the value of Optimal Transport problems based on directional differentiation. Fourth, we use our methodology to estimate mortgage pricing differentials by race on a novel data set linking 2018–2019 Home Mortgage Disclosure Act (HMDA) data to Optimal Blue rate locks. We find robust evidence for mortgage pricing differentials by race, particularly among Conforming mortgage borrowers who are relatively creditworthy.
Description
| Type of resource | text |
|---|---|
| Date created | September 10, 2021 |
Creators/Contributors
| Author | Willen, Paul |
|---|---|
| Author | Zhang, David |
| Organizer of meeting | Diamond, Rebecca |
| Organizer of meeting | van Dijk, Winnie |
| Organizer of meeting | Schneider, Martin |
| Organizer of meeting | Tsivanidis, Nick |
Subjects
| Subject | economics |
|---|---|
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Willen, P. and Zhang, D. (2022). Do Lenders Still Discriminate? A Robust Approach for Assessing Differences in Menus. Stanford Digital Repository. Available at https://purl.stanford.edu/ss954gq4851
Collection
SITE Conference 2021
View other items in this collection in SearchWorksContact information
- Contact
- siteworkshop@stanford.edu
Also listed in
Loading usage metrics...