Investigating bank lending discrimination in the US using CRA-rated banks’ HMDA loan data

This study investigates the use of HMDA data for CRA-rated (Community Reinvestment Act) banks to study possible bank loan discrimination against minorities from 2007 to 2016. We examine banks rated Outstanding for compliance with the CRA, which means that regulators believe that these banks are doing an outstanding job at serving low- and moderate-income neighborhoods. We expect that CRA Outstanding rated banks are unlikely to commit taste-based discrimination. We find that these banks have statistical discrimination in loan approvals for Asian, Black, Hispanic, and women borrowers. We also find that these banks have statistical discrimination against white males without co-applicants relative to the omitted group of white males with co-applicants. This result is inconsistent with taste-based discrimination. We conclude that either the models or the HMDA data are ill-suited for studying lending discrimination.