The Importance of Race in Home Mortgage Loan Approvals

The purpose of this research note is to document the importance of empirical specification in the analysis of the influence of race on home mortgage lending decisions. Using a variety of testing procedures and detailed lending decision data for a large midwestern lending institution, the authors show that dramatically different results may be obtained from slight changes in empirical specification. The case study presented here can serve as a prototype for the large number of such case studies needed to obtain convincing evidence on the question of where and how discrimination may, or may not, emerge as a marketwide phenomenon.