A new study carried out by Marquette University professor, Andrew Hanson, has revealed that mortgage lenders deny and accept applications based on race.
The three year study was carried out using emails to test mortgage loan originator responses to borrower queries with stereotypically Black and white sounding names.
Hanson and his associates sent two identical emails to more than 5,000 lenders, one from a person with a “white” sounding name and another from a person with a “black” sounding name.
The “White” names they used included Maxwell Baker, Spencer Miller and Jake Krueger. While the “Black” names included Jamal Washington, Terrell Banks and DaQuan Booker. Names were categorized by examining New York City birth records and determining which race the name was more likely to be associated with it. The emails also included information about the borrower’s low credit score, high credit score or did not contain credit score information at all.
After sending out the letters, Hanson and his colleagues tracked whether and how the MLOs responded.
“Our results show that MLOs discriminate on the basis of race and treat clients differently by their reported credit score,” the study conclusion said. “We find that on net, 1.8% of MLOs discriminate by not responding to inquiries from African-Americans while responding to inquiries from white clients. We find larger net response differences across credit score types, with 8.5% of MLOs responding to clients in our high-credit-score group while not responding to clients who do not report a credit score.”
Hanson and his colleagues also revealed that MLOs offer more details about loans and are more likely to send follow-up correspondence to “white” borrowers. Than their “supposed counterparts” which shows how relevance racial discrimination still is till this day.