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Do Lenders Discriminate in Processing Defaults?
Brent W. Ambrose and Charles A. Capone, Jr.
Vol. 2, No. 1, Race and Default in Credit Markets: A Colloquy (February 1996), pp. 89-98
Published by: US Department of Housing and Urban Development
Stable URL: http://www.jstor.org/stable/20868399
Page Count: 10
You can always find the topics here!Topics: Loan defaults, Foreclosures, Mortgage loans, Lenders, Loans, Federal Housing Administration mortgages, Cityscapes, Housing, Housing discrimination, Statistical significance
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A major criticism leveled against the Berkovec, Canner, Gabriel, and Hannan (BCGH) study of potential lending discrimination is that there are significant unobservable influences that could bias their results against a finding of discriminatory behavior. Two of the three critics maintain that, among these unobservable influences should be a higher incidence of foreclosure for minorities, conditional on loan default, which would explain the BCGH findings. This article examines that question in detail and finds that the postdefault foreclosure experience of minorities is very similar to that of nonminorities, and that lenders tend to give minorities more (rather than less) time to work out their situation before commencing foreclosure. These findings are robust across a number of dimensions, nullifying the above-mentioned critiques of BCGH. However, the article also points out methodological weaknesses that still leave doubts as to the validity of the BCGH results.
Cityscape © 1996 US Department of Housing and Urban Development