There are a large and growing number of popular media articles alleging racial discrimination in the mortgage market. It is simply assumed that if lenders are less willing to extend credit to blacks or make loans in “black neighborhoods” as often or with similarly favorable terms as they do whites or “white neighborhoods” that this apt to be explained by explicit racism or (subconscious) bias. These naive arguments persist despite tremendous evidence that there are observable and unobservable differences that have profound effects on credit risk.
I will briefly describe some of this evidence before making my own modest contribution using data from zillow.com and the US census. You can click here if you are familiar with this literature already and wish to skip ahead to my analysis.
1- Blacks have much lower credit scores (e.g., FICO)
source
The difference in between the white and black means is about 1 standard deviation.