Cross-Lender Variation In Home Mortgage Lending

The Community Reinvestment Act of 1977 (CRA) requires depository institutions to help meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe and sound lending practices. Despite the clear focus of CRA and other fair credit and housing legislation on individual lender responsibilities, consumer finance studies generally do not concede any differences in the mortgage lending activities of individual lenders; they consider variance among either individuals or neighborhoods. Virtually all of the studies draw inferences about the practices of some prototypical lender from data pooled across many lenders. Our strategy is to examine differences among individual lenders in the rates at which they receive applications from, and originate mortgage loans to, minority and low-income applicants. More specifically, we use the new applicant-level data gathered under the Home Mortgage Disclosure Act of 1975 -A) to examine differences in minority and low-income mortgage loan originations across the more than 8,600 U.S. lenders who received applications for single-family home purchase loans in 1990. We then allocate the variance in lender-specific credit originations into two components: differences among lenders in their application volumes from various population groups, and differences among lenders in the actions taken on applications they receive. Both the applications and their disposition are then examined further for lender differences.