The facts of lending discrimination cannot be argued away by examining default rates

Abstract

This article argues that interracial differentials in mortgage default rates are an unreliable indicator of racial discrimination in mortgage markets.

First, minority applicants may be approved at nondiscriminatory institutions and thereby end up in the pool of mortgagors, even though they were first discriminated against at other institutions. Second, even with no mortgage discrimination, the expected default risk of minority mortgagors overall is probably higher than that of white mortgagors overall. Thus, even if discrimination eliminated some of the riskier minority applicants, it is not necessarily true that the default rate of minority mortgagors will be lower than that of whites.