The Influence of Bureau Scores, Customized Scores and Judgmental Review on the Bank Underwriting Decision-Making Process

M Collins, Keith Harvey and Peter Nigro

Journal of Real Estate Research, 2002, vol. 24, issue 2, 129-152

Abstract: In recent years commercial banks have moved toward automated forms of underwriting. This study employs unique bank loan-level data from a scoring lender to determine whether automated underwriting exhibits a potential “disparate impact” across income strata. The findings indicate that strict application of this custom scoring model leads to higher denial rates for low- to moderate-income borrowers when compared with both a naïe judgmental system and a bureau scoring approach. These results suggest that financial regulators should focus more resources on the evaluation and study of customized scoring models.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:taf:rjerxx:v:24:y:2002:i:2:p:129-152

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DOI: 10.1080/10835547.2002.12091093

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