Flaws in the Use of Loan Defaults To Test for Mortgage Lending DiscriminationAbstractThis critique examines the proposal that loan defaults can be used to test for the existence of discrimination in the mortgage approval process. The critique then shows that a test based on loan defaults is biased against finding evidence of discrimination and that some of these key biases do not arise in a direct test using loan approval data. Finally, the critique examines and rejects a similar proposal to use information on lender loss upon default to test for differential treatment during the foreclosure process.Flaws in the Use of Loan Defaults To Test for Mortgage Lending Discrimination (*.pdf, 80 KB)
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