?All Other Things Being Equal?

April 30, 2002

Urban Institute Study Finds Disparate Treatment Of Prospective Minority Borrowers


Inman News Features

A study conducted by the Urban Institute for the U.S. Department of Housing and Urban Development found minorities still face some discrimination when they inquire about obtaining a home loan. The study concluded most prospective home loan borrowers receive equal treatment as required by law, but "room for improvment" still exists.

The newly published study, "All Other Things Being Equal: A Paired Testing Study of Mortgage Lending Institutions," was based on data collected in Los Angeles and Chicago two years ago.

The study found that "in the majority of cases, minorities and whites received equal treatment, or when differences occurred, they were equally likely to favor the minority as the white."

But the study also found, through the use of paired testing, "statistically significant patterns of unequal treatment that systematically favor whites."

The study looked at such issues as receipt of requested information, loan amounts offered, number of products discussed, "coaching" through the application process, follow-up help and steering toward more-restrictive loans.

In the paired testing, one white individual and one black or Hispanic individual posed as home buyers and inquired about the availability and terms for home mortgage loans in the pre-application stage of the lending process. The two individuals presented themselves as equally qualified borrowers; consequently, systemic differences in the treatment they received provides direct evidence of discrimination, according to researchers.

The unequal treatment took different forms in the two metropolitan areas and for the two minority groups. In Los Angeles, blacks were offered less coaching than comparable white home buyers were and were more likely than whites to be encouraged to consider an FHA loan, which can cost more over the life of the loan and may permit the lender to charge higher fees. Hispanics were denied basic information about loan amount and house price, told about fewer loan products and received less follow-up compared with white home buyers.

In Chicago, blacks were denied basic information about loan amount qualification, told about fewer products, offered less coaching and received less follow-up than comparable white home buyers. Hispanics were quoted lower loan amounts or house prices, told about fewer products and offered less coaching.

Copyright: Inman News Service


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