Impact of Racial Disparities in Home Mortgage Lending Outcomes on Intergenerational Mobility

Abstract

This paper evaluates the level of racial disparities within the home mortgage lending market and their relationship with intergenerational upward mobility. Using data from the Home Mortgage Disclosure Act (HMDA) 2010 dataset and Opportunity Insights datasets, this study scrutinizes lending disparities and intergenerational upward mobility at the Commuting Zone (CZ) level. By only evaluating lending outcomes for first-lien home purchase loans, I am able to capture the cohort of prospective home buyers moving to better neighborhoods and self-sorting themselves into geographical regions. I estimate the relationship between the disparities in mean denial rates between specified race groups within a given CZ, with the disparities in CZ-level predicted intergenerational childhood outcomes for the specified race groups. I find that disparities in denial rates between Black/Hispanic individuals and non-Hispanic whites disproportionately negatively affect Black and Hispanic children's expected future outcomes, especially those with parents at lower income percentile ranks in the national income distribution.