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Subprime Lending Over Time: The Role of Race, a discussion paper released today, analyzes the racial gap in subprime mortgages over time in Pennsylvania, New Jersey, and Delaware.
The study estimates a portion of the gap that cannot be attributed to such characteristics as income, credit score, loan amount, degree of documentation, denial rate, residence in a minority tract, and debt-to-income ratio. It concludes that the unexplained portion suggests that bias in mortgage lending cannot be ruled out.
The study was written by Marvin M. Smith, Ph.D., community development research advisor in the Bank's Community Affairs Department, and Christy Chung Hevener, a former Bank employee.
The Community Affairs Department conducts research that examines issues of affordable housing, community and economic development, financial education, and consumer credit and payments that affect low- and moderate-income people and communities.
The Federal Reserve Bank of Philadelphia helps formulate and implement monetary policy, supervises banks and bank holding companies, and provides financial services to depository institutions and the federal government. It is one of the 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Philadelphia Federal Reserve Bank serves eastern Pennsylvania, southern New Jersey, and Delaware.