Exploring the Neighborhood Contingency of Race Discrimination in Mortgage Lending in Columbus, Ohio
Discrimination in mortgage lending on the basis of race and the racial composition of neighborhoods has emerged as a hotly debated issue over the last several years. Part of the problem with the existing debate, however, is that the geographically contingent nature of discrimination has not been recognized. This paper argues that discrimination motivated by prejudice is contingent on the racial composition of neighborhoods—i.e., that lending institutions treat black mortgage applicants differently when buying homes in white neighborhoods than when buying homes in black neighborhoods. Using a sample of mortgage applicants drawn from the 1992 individual-level Home Mortgage Disclosure Act (HMDA) data for the Columbus, Ohio metropolitan area, I found that the effect of being black on the conditional probability of having a loan application denied is much higher in all-white neighborhoods than in minority neighborhoods, especially for applicants making large loan requests. I also found that white applicants for small loans had a higher conditional denial probability in minority neighborhoods than in all-white neighborhoods. Moreover, both race-based and neighborhood-based discrimination appear not to exist until the interaction between race and neighborhood is accounted for. The implications of the findings are clear—we must consider the geographically contingent nature of prejudice and discrimination in order to understand the factors that produce and maintain extremely high levels of segregation in our metropolitan areas.