Loan Performance and Race

Robert E Martin and Carter Hill

Economic Inquiry, 2000, vol. 38, issue 1, 136-50

Abstract: Recent studies find evidence of racial discrimination in mortgage markets. Although these studies explore loan approval rates for whites versus minorities, they do not specifically consider loan performance, either in the form of default rates or loan administration costs. This study considers discrimination in the used car credit market, where the collateral is not subject to location externalities, collateral value and quality do not vary as much as in real estate, and the loan terms are shorter. We find administration costs and default rates are higher for minorities than for whites, controlling for age, income, home ownership, wealth, occupation, loan terms, and geographic location. Copyright 2000 by Oxford University Press.

Date: 2000
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