Inside a Lender: A Case Study of the Mortgage Application Process

A lthough fair lending laws mandate that all loan applicants receive equal treatment, all of the evidence reveals wide disparities in origi-nation outcomes between white and minority loan applicants. Some of these differences are attributable to income and wealth differences between minorities and whites. Rigorous statistical analysis, however, continues to find loan denial disparities between minority and white loan applicants, even when differences in applicant creditworthiness and loan characteristics have been controlled for, and even when lenders appear to believe that no dis-parate treatment exists. This case study examines the loan application process of one lender in detail, to shed light on the relationship between a lender's organizational practices and staff perceptions and its loan outcomes as reflected in its HMDA scores. 1 While the results of a case study of one lender have no statistical gen-eralizability, the case study approach is valuable because it " allows an investigation to retain the holistic and meaningful characteristics of real-life events—such as...managerial processes " (Yin 1989, p.14). The research team conducted interviews with seven employees over a two-day period and conducted follow-up interviews with the lender's president and two loan counselors. The initial interviews, following the discussion guides