But even after this correction, minorities seem tobe rejected at a rate of 17%, as opposed to only11% for whites. This difference, the Boston Fedclaimed, must be caused by racism. . [
Mortgagelending in Boston: Interpreting HMDA data
(Working Paper 92-7)]Oh, yeah? But what about those default rates?
"We were aware that people say, 'Oh, thismay berational discrimination,becauseminorities default more,'"
the Boston Fed'sMunnell told
. But her study sample was toorecent to check default rates directly. Instead, theBoston Fed compared default rates across censustracts.
"And what we found was, there wasno relationship between the racialcomposition of the tract and the default rate.So it wasn't true that tracts with largeminority populations had higher defaultrates."
Think about this carefully. The Boston Fedauthors apparently assumed that equal defaultrates meant all minority applications are an equalcredit risk compared with whites. But they'rewrong. These census tract mortgages had alreadypassed through the loan approval process-whichhad presumably rejected a higher proportion of minority applicants on the way. So the fact thatwhite and minority default rates finished up equalmeant mortgage lenders knew what they were