Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight
This study examines racial and ethnic disparities in mortgage-lending outcomes across different lender types—large banks, fintech lenders, non-bank lenders, small banks, and credit unions—using Home Mortgage Disclosure Act (HMDA) data from 2018 to 2023. By analyzing approval rates, rate spreads, and...
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MDPI AG
2025-02-01
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| Online Access: | https://www.mdpi.com/2674-1032/4/1/8 |
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| author | Zilong Liu Hongyan Liang |
| author_facet | Zilong Liu Hongyan Liang |
| author_sort | Zilong Liu |
| collection | DOAJ |
| description | This study examines racial and ethnic disparities in mortgage-lending outcomes across different lender types—large banks, fintech lenders, non-bank lenders, small banks, and credit unions—using Home Mortgage Disclosure Act (HMDA) data from 2018 to 2023. By analyzing approval rates, rate spreads, and origination charges, we evaluate how borrower outcomes vary by race and ethnicity, controlling for loan characteristics, borrower attributes, and regional factors. Our findings reveal that Black and Hispanic borrowers consistently face less favorable terms than White borrowers, with disparities differing by lender type. Large banks, operating under stringent regulatory oversight, demonstrate relatively equitable pricing but impose higher loan denial rates on minorities. Credit unions, despite offering the lowest rate spreads overall, penalize minority borrowers more severely in pricing than other lender types. Fintech lenders, while charging higher-rate spreads and fees, show smaller credit access disparities for minority borrowers. Non-bank and small banks display mixed results, with inconsistencies in their treatment of minorities across pricing and credit access. These results highlight that neither technological innovations nor alternative lending models alone suffice to eliminate systemic inequities. Achieving equitable mortgage lending requires enhanced regulatory oversight, greater transparency in algorithmic decision-making, and stricter enforcement of fair lending practices. |
| format | Article |
| id | doaj-art-2dd1474a4c9c4fb58dc21927445aa8f7 |
| institution | DOAJ |
| issn | 2674-1032 |
| language | English |
| publishDate | 2025-02-01 |
| publisher | MDPI AG |
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| series | FinTech |
| spelling | doaj-art-2dd1474a4c9c4fb58dc21927445aa8f72025-08-20T02:42:29ZengMDPI AGFinTech2674-10322025-02-0141810.3390/fintech4010008Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory OversightZilong Liu0Hongyan Liang1Department of Business Administration, Gies College of Business, University of Illinois Urbana-Champaign, Champaign, IL 61820, USADepartment of Business Administration, Gies College of Business, University of Illinois Urbana-Champaign, Champaign, IL 61820, USAThis study examines racial and ethnic disparities in mortgage-lending outcomes across different lender types—large banks, fintech lenders, non-bank lenders, small banks, and credit unions—using Home Mortgage Disclosure Act (HMDA) data from 2018 to 2023. By analyzing approval rates, rate spreads, and origination charges, we evaluate how borrower outcomes vary by race and ethnicity, controlling for loan characteristics, borrower attributes, and regional factors. Our findings reveal that Black and Hispanic borrowers consistently face less favorable terms than White borrowers, with disparities differing by lender type. Large banks, operating under stringent regulatory oversight, demonstrate relatively equitable pricing but impose higher loan denial rates on minorities. Credit unions, despite offering the lowest rate spreads overall, penalize minority borrowers more severely in pricing than other lender types. Fintech lenders, while charging higher-rate spreads and fees, show smaller credit access disparities for minority borrowers. Non-bank and small banks display mixed results, with inconsistencies in their treatment of minorities across pricing and credit access. These results highlight that neither technological innovations nor alternative lending models alone suffice to eliminate systemic inequities. Achieving equitable mortgage lending requires enhanced regulatory oversight, greater transparency in algorithmic decision-making, and stricter enforcement of fair lending practices.https://www.mdpi.com/2674-1032/4/1/8mortgage lendingracial disparitiesfintech lendersregulatory oversightfair lending |
| spellingShingle | Zilong Liu Hongyan Liang Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight FinTech mortgage lending racial disparities fintech lenders regulatory oversight fair lending |
| title | Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight |
| title_full | Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight |
| title_fullStr | Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight |
| title_full_unstemmed | Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight |
| title_short | Racial Disparities in Conforming Mortgage Lending: A Comparative Study of Fintech and Traditional Lenders Under Regulatory Oversight |
| title_sort | racial disparities in conforming mortgage lending a comparative study of fintech and traditional lenders under regulatory oversight |
| topic | mortgage lending racial disparities fintech lenders regulatory oversight fair lending |
| url | https://www.mdpi.com/2674-1032/4/1/8 |
| work_keys_str_mv | AT zilongliu racialdisparitiesinconformingmortgagelendingacomparativestudyoffintechandtraditionallendersunderregulatoryoversight AT hongyanliang racialdisparitiesinconformingmortgagelendingacomparativestudyoffintechandtraditionallendersunderregulatoryoversight |