Multifamily Mortgage Loans : Bankruptcy Exemption Rates, Creditor's Rights, Fair Lending Practice, and Other Factors
McClintic, Erin R.
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As part of an internship with Ernst and Young, the author developed a model to explore the impact of bankruptcy exemption rates and race in the home loan approval process. The probit analysis provides lawmakers with two interesting findings: (1) higher bankruptcy exemption rates decreased multifamily mortgage approvals and (2) minorities and minority neighborhoods were lent to less often than white neighborhoods and applicants from 1992 through 1996. The second finding shows that discrimination has been present in the United States in the last half decade. One might conclude that fair lending laws are probably still being violated across the nation today. With this information, one could predict that fair lending lawsuits might not diminish anytime in the near future. Lawmakers should use this information to enhance the enforcement of the fair lending laws in hopes to reduce the ongoing problem. The downside to this proposal is the costs associated with strengthening enforcement. However, lawmakers should see this as an opportunity to rid the bias in lending practices. Fixing the problem now would mean lower trial costs in the future.