U.S. Department of Housing and Urban Development

Office of Policy Development and Research

All Other Things Being Equal:

A Paired Testing Study of

Mortgage Lending Institutions

Final Report

April 2002
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All Other Things Being Equal: A Paired Testing Study of

Mortgage Lending Institutions

Final Report

Prepared for:

U.S. Department of Housing and Urban Development

Office of Fair Housing and Equal Opportunity

By:

Margery Austin Turner

Fred Freiberg

Erin Godfrey

Carla Herbig

Diane K. Levy

Robin R. Smith

The Urban Institute

Washington, DC 20037

April 2002
The contents of this report are the views of the contractor, and do not necessarily reflect the views of

policies of the U.S. Department of Housing and Urban Development or the U.S. Government.

ACKNOWLEDGEMENTS

This project could not have been completed without the commitment and hard work of

testers, testing coordinators, and local testing organizations in Los Angeles, Chicago, and New

Orleans. The authors therefore extend our appreciation and thanks to the directors and staff of

Progressive Management Resources, Inc., the Leadership Council for Metropolitan Open

Communities, and the Greater New Orleans Fair Housing Action Center.

Stephen L. Ross, of the University of Connecticut, served as an adviser to this project,

assisting in the design of testing protocols and tester assignments, and reviewing draft

materials, results, and reports. His expertise in the areas of housing finance, paired testing, and

statistical methods has been invaluable.

In addition, a panel of experienced fair housing professionals provided advice and

guidance on testing protocols and procedures. We thank Tracey Goodson Barrett of the

Housing and Civil Enforcement Section of the Civil Rights Division of the U.S. Department of

Justice, Mary Davis of the Leadership Council for Metropolitan Open Communities, Jonathan

Jones and Heidi Olguin of Progressive Management Resources, Inc., Rick Rhey of the

Southern Arizona Housing Center, and Carla Wertheim of the Metropolitan Milwaukee Fair

Housing Council.

Finally, staff of the Department of Housing and Urban Development, particularly Dale

Rhines and Sharon Bower from the Office of Fair Housing and Equal Opportunity, provided

guidance and oversight throughout the project’s design and implementation. In addition, Todd

Richardson from the Office of Policy Development and Research assisted in the final review

process.

Despite the generous contributions from these individuals and organizations, any errors

and omissions that may remain in this report are, of course, our own.
 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, D.C. 20410-0001 

THE SECRETARY

Foreword to “All Other Things Being Equal"

HUD Secretary Martinez

A new home buying report, "All Other Things Being Equal," conducted in Los Angeles

and Chicago shows that most people of color do not face discriminatory treatment when they

inquire about loan products. Using testers, the report uncovered that both minority and white

testers received equal treatment the majority of the time. However, the findings show that

African-American and Hispanic homebuyers face a statistically significant risk of receiving less

favorable treatment than comparable whites when they ask mortgage-lending institutions about

financing options.

The study focused on lending discrimination in the earliest stage of the homebuying

process – when a prospective homebuyer first begins to apply for a mortgage loan. If an

individual is discouraged from applying for a loan at all, or is given discriminatory loan terms

and conditions, the entire home buying process is fatally compromised.

Under contract with the U.S. Department of Housing and Urban Development, the Urban

Institute used a paired testing technique to determine if minority home loan applicants received

the same treatment and information at the pre-application stage of the process as white

applicants. Hispanic and African-American testers were matched with white testers who had

roughly equivalent financial backgrounds.

“All Other Things Being Equal" underscores that there are still those who would

contradict not only Fair Housing laws, but the principles of freedom and opportunity we treasure

as Americans. The Department will use these findings to help assure that American homebuyers

and the mortgage lending industry are aware of their rights and responsibilities under the Fair

Housing Act.

Mel Martinez
TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................ i

CHAPTER 1: BACKGROUND AND APPROACH........................................................ 1

The Homeownership Testing Project ................................................................. 2

Overview of the HTP Methodology..................................................................... 4

Organization of the Report ................................................................................. 6

CHAPTER 2: THE HTP PAIRED TESTING METHODOLOGY..................................... 8

Sample of Lending Institutions ........................................................................... 8

Basic Test Structure ......................................................................................... 12

Organizational Structure................................................................................... 12

Test Authorizations........................................................................................... 13

Tester Assignments - Characteristics and Instructions .................................... 13

Testing Protocols.............................................................................................. 16

Replicating HTP Lender Testing Protocols ...................................................... 18

CHAPTER 3: PATTERNS OF UNEQUAL TREATMENT IN LOS ANGELES

AND CHICAGO ........................................................................................................... 20

Statistical Methods for Paired Testing Analysis................................................ 21

Question 1: Did testers receive the information they requested?.................... 24

Question 2: How much were testers told they could afford? ........................... 26

Question 3: How many loan products were testers told about? ...................... 27

Question 4: How much “coaching” did testers receive? .................................. 29

Question 5: Did testers receive follow-up contact? ......................................... 31

Question 6: Were testers encouraged to consider FHA?................................ 34

Summary of Statistically Significant Findings................................................... 36

CHAPTER 4: SUMMARY AND CONCLUSIONS........................................................ 37

Pre-Test Stage ................................................................................................. 37

Pilot Stage ........................................................................................................ 39

Future Paired Testing Research ...................................................................... 40

ANNEX A: ASSIGNED FINANCIAL CHARACTERISTICS

ANNEX B: TESTING REPORT FORM

ANNEX C: TERMS AND CONDITIONS

ANNEX D: POOLED AND STRATIFIED RESULTS
i

EXECUTIVE SUMMARY

When first-time homebuyers begin shopping for a house, they need to learn about

mortgages for which they can qualify and about house prices they can afford. This information

can be provided by a variety of different sources, including mortgage lending institutions, real

estate agents, and mortgage brokers. But if potential homebuyers cannot obtain full and fair

access to information about mortgage financing, they may give up on their pursuit of

homeownership, their housing search may be restricted, or they may be unable to negotiate the

most favorable loan terms. Thus, pre-application inquiries about mortgage financing options

represent a critical phase in the homebuying process.

The U.S. Department of Housing and Urban Development contracted with the Urban

Institute to rigorously assess the effectiveness of paired testing for determining whether minority

homebuyers receive the same treatment and information as whites at the pre-application phase

of the mortgage lending process, and to produce rigorous measures of the incidence of unequal

treatment in two metropolitan areas. The mortgage lending process consists of a complex

series of stages, including advertising and outreach by lending institutions, responses to preapplication inquiries from potential borrowers, approval or denial of loan applications and

determination of loan terms and conditions, and finally, loan administration. Discrimination may

occur at any of these stages and may take different forms at different stages. 1

In a paired test, two individuals―one white and one minority―pose as homebuyers and

inquire about the availability and terms for home mortgage loans. Because the two members of

a tester team present themselves as equally qualified borrowers in every respect except their

race or ethnicity, systematic differences in the treatment they receive provide direct evidence of

adverse treatment discrimination. Paired testing has been used widely to detect and measure

discrimination by rental and sales agents, but only a few, relatively small-scale investigative

studies have been applied to mortgage lending.

This study consisted of two major stages―a pre-test stage and a pilot stage. The pretest stage was used to experiment with a fairly wide variety of paired testing scenarios, and to

assess the feasibility of testing several different sources of mortgage financing information.

More specifically, we conducted tests of mortgage lending institutions, mortgage brokers, real

estate agents, new construction sales agents, and mobile home sales agents. This pre-test

experience informed the design of the pilot stage, in which conducted approximately 250 paired

tests of a representative sample of mortgage lending institutions in Los Angeles, California and

 

1

 For more information on existing evidence about discrimination at other stages in the mortgage lending

process, see Margery Austin Turner and Felicity Skidmore.1999. Mortgage Lending Discrimination: A Review of

Existing Evidence. Washington, D.C.: The Urban Institute.
ii

Chicago, Illinois, using a standardized set of protocols in order to yield statistically rigorous

measures of discrimination against African Americans and Hispanics in these two metropolitan

housing markets.

Paired Testing Can Be an Effective Tool for Research and Enforcement

In the first stage of this study, a total of 78 tests were conducted in two markets―

Orange County, California and New Orleans, Louisiana. Because the format of these tests, and

the information sources they targeted were so varied, they cannot be used to produce statistical

measures of the extent of discrimination. Nevertheless, the pre-tests do provide important

insights about the forms that mortgage lending discrimination may take and about methods for

conducting effective testing.

The intensive pre-testing effort found that rigorous paired testing is feasible―though

difficult―for all the information sources we considered. The pilot stage focused on mortgage

lending institutions, because of the central role they play in the sector. But future research and

enforcement efforts can and should explore other information sources, including mortgage

brokers and referrals by real estate agents. More research is also needed to fully understand

how homebuyers search for mortgage financing, including racial and ethnic differences in

information sources and search strategies.

 The pre-test effort also found that one of the most serious forms of discrimination that

can be discerned by paired testing at the pre-application stage is differential estimates of home

price and total loan amount. These estimates potentially play a major role in determining where

people search for housing and whether they decide they can afford to become homebuyers.

Therefore, the pilot phase of the Homeownership Testing Project was explicitly designed to

measure this form of differential treatment rigorously.

Finally, pre-testing highlighted the complexity and difficulty of mortgage lending testing.

This type of testing demands more from both testers and testing organizations than routine

rental testing, and great care must be taken with tester training, supervision, and record

keeping, as well as with the actual conduct of the tests themselves in order to achieve credible

test results. Not all local fair housing organizations necessarily have the capacity to effectively

conduct lending tests.

African Americans Experience Unequal Treatment from Lending Institutions in Los

Angeles and Chicago

The pilot phase of the Homeownership Testing Project focused on a single, clearly

defined scenario: A first-time homebuyer visits a mortgage lending institution requesting help in

figuring out a price range for housing, a loan amount for which he or she might qualify, and loan

products that might be suitable, to answer the basic research question: Do minorities receive
iii

the same treatment and information as whites at the pre-application phase? All the tests

conducted in the pilot phase of the Homeownership Testing Project consisted of individuals

visiting offices of mortgage lending institutions (including both conventional and sub-prime

lenders). Testers posed as first-time homebuyers, making a general uninformed request for

information about how much house they could afford and what loan products might be available

to them. All of the testers were assigned financial profiles that qualified them for products

targeted to borrowers with A- credit in their respective housing markets. Their income and asset

levels qualified them to purchase a median-priced house in their metropolitan area, but they

were asset constrained and had minor problems with their credit history. The two members of

each tester pair were assigned virtually identical financial and household characteristics, with

the minority partner always slightly better qualified than the white.

In both Chicago and Los Angeles we conducted tests for a representative sample

mortgage lending institutions in the metropolitan area that report under the Home Mortgage

Disclosure Act (HMDA),2 accept at least 90 mortgage loan applications per year, and had offices

in the region that a first-time homebuyer could realistically find and visit. Lending institutions

with very large application volumes not only had a high probability of selection, but could appear

in the sample more than once. This sampling strategy allows us to make statements about the

incidence of differential treatment by large lending institutions in Chicago and Los Angeles that

are directly accessible to first-time homebuyers.3

The pilot test results show that in both Los Angeles and Chicago, African American and

Hispanic homebuyers face a significant risk of receiving less favorable treatment than

comparable whites when they visit mortgage lending institutions to inquire about financing

options. In the majority of cases, minorities and whites received equal treatment, or when

differences occurred, they were equally likely to favor the minority as the white.4

 But in both

 

2

 HMDA requires all independent mortgage companies and mortgage lenders owned by depository

institutions that make at least 100 home purchase and/or refinancing loans in a given year to report on the

demographic and locational characteristics of all applications and loans.

3

 Levels and patterns of discrimination may be different for smaller lending institutions or when inquiries are

made by telephone or internet rather than in person.

4

 It is important to recognize that even when we do not observe a statistically significant pattern of

systematically unequal treatment, discrimination may have occurred in individual cases. For some treatment

variables, differences in treatment occurred quite frequently but favored minorities just as often as whites. These

differences may result from random variations in the behavior of loan officers, but they may also include cases of

discrimination on the basis of race or ethnicity.
iv

metropolitan areas, paired testing reveals statistically significant patterns of unequal treatment

that systematically favor whites.5

Unequal treatment takes different forms in the two metropolitan areas and for the two

minority groups.

In Los Angeles --

• Blacks were offered less coaching than comparable white homebuyers, and were

more likely to be encouraged to consider an FHA loan.

• Hispanics were denied basic information about loan amount and house price, told

about fewer products, and received less follow-up compared to Anglo homebuyers.

In Chicago –

• Blacks were denied basic information about loan amount and house price, told about

fewer products, offered less coaching, and received less follow-up than comparable

white homebuyers.

• Hispanics were quoted lower loan amounts or house prices, told about fewer

products, and offered less coaching than comparable Anglo homebuyers.

These patterns of unequal treatment occurred regardless of whether the two members of a

tester pair met with the same loan officer or with different loan officers.

Adverse Treatment of African American and Hispanic Homebuyers Face a

Los Angeles Chicago Treatment Categories Blacks Hispanics Blacks Hispanics

Information requested U U

Loan amount and house price U

Number of products UUU

Coaching U UU

Follow-up contact U U

FHA encouraged U

U Unequal treatment favors whites or Anglos over blacks or Hispanics at a 90 percent level of

statistical significance or higher 

 No statistically significant differences in treatment

 

5

 Results are reported as statistically significant when the difference between the rate of white/Anglo-favored

treatment and the rate of minority-favored treatment is significant at a 90 percent confidence level or higher.
v

The frequency of unfavorable

treatment varies considerably from one

category to another. For some categories,

equal treatment occurred in the vast majority

of cases, but when differences occurred, the

white tester was dramatically more likely to

be favored than his or her minority partner.

For other treatment categories, differences in

treatment occurred much more often, but

again were substantially more likely to favor

the white than the minority tester. The series

of charts below illustrate the levels of

unfavorable treatment for each treatment

category where statistically significant

differences were observed.

Despite the variations in the forms

that differential treatment takes, these

findings demonstrate that African American

and Hispanic homebuyers in both Los

Angeles and Chicago face a significant risk

of unequal treatment when they visit mainstream mortgage lending institutions to make

pre-application inquiries. Discriminatory treatment at this early stage in the mortgage lending

process has the potential to discourage some minorities from continuing their housing search, to

limit their search to lower cost homes than they could actually afford, and to prevent them from

choosing the most favorable loan products.

Therefore, we conclude that paired testing at the pre-application stage of the mortgage

lending process is feasible and effective for both enforcement and research purposes.

Additional testing should be conducted, including systematic studies that focus on other sources

of information about mortgage products and on homeseekers who are less well-qualified as

borrowers. However, because of the complexity of this kind of testing and the differences

between metro area results, we do not recommend a large-scale national study of discrimination

at the pre-application stage of the mortgage lending process. Instead, systematic studies

should be conducted on a site-by-site basis, with ample time and resources for effective

training, test coordination, and quality control.

Two female testers, one white and one black, visited

the same Los Angeles area lender two days apart

and met with the same loan officer. The testers told

the loan officer that they were first-time homebuyers

and needed assistance in figuring out a home price

range and a loan amount for which they might

qualify. The loan officer requested and obtained

detailed information on household income, debts,

and assets from both testers and asked about their

respective credit situations. He then estimated that

the white tester would qualify for a $332,500 loan to

purchase a $350,000 home and, but estimated that

the black tester would qualify for a $237,500 loan to

purchase a $245,000 home. The loan officer told the

white tester that a seller would likely pay some of the

closing costs, but no mention was made about seller

assistance to the black tester. The loan officer also

told the white tester that it was a good idea to have a

home inspection conducted prior to purchase, while

the loan officer did not mention anything about the

value of a home inspection to the black tester. The

loan officer provided a complete loan application

package to the white tester, but not to the black

tester.
1

CHAPTER 1: BACKGROUND AND APPROACH

More than three decades after the passage of the Fair Housing Act (Title VIII of the 1968

Civil Rights Act), African American and Hispanic homebuyers still do not enjoy equal access to

home ownership. Widespread evidence indicates that minority homebuyers are less likely than

whites to obtain mortgage loans and, if they are successful, receive less favorable loan amounts

and terms. However, questions remain about the extent to which discrimination is the cause of

these unequal outcomes, and about the forms that discrimination may take. A recent review of

existing social science evidence concluded that minority homebuyers in the United States do

face discrimination from mortgage lending institutions.1

 But serious gaps remain in what we

know and more rigorous information is needed to refine and target enforcement strategies, to

enable lending institutions to monitor their own performance, and to design remedies to reduce

discrimination in home mortgage lending.

Paired testing provides a uniquely powerful tool for investigating both the incidence and

the forms of adverse treatment based on race or ethnicity. In a paired test, two individuals―one

white and one minority―pose as homebuyers and inquire about the availability and terms for

home mortgage loans.2

 Because the two members of a tester team present themselves as

equally qualified borrowers in every respect except their race or ethnicity, systematic differences

in the treatment they receive provide direct evidence of adverse treatment. Paired testing has

been used widely to detect and measure adverse treatment by rental and sales agents, but only

a few, relatively small-scale investigative studies―primarily by the National Fair Housing

Alliance (NFHA)―have been applied to mortgage lending. During the early 1990s, NFHA

conducted tests in seven cities (Atlanta, Chicago, Dallas, Denver, Detroit, Oakland, and

Richmond). Testers posed as first-time homebuyers and refinancers inquiring about financing

terms and conditions at the pre-application stage. A reanalysis of these testing data by the

Urban Institute concluded that differential treatment occurred at significant levels in at least

some cities. Minorities were less likely to receive information about loan products, received less

time and information from loan officers, and were quoted higher interest rates in most of the

cities where tests were conducted.

 

1 Mortgage Lending Discrimination: A Review of Existing Evidence. 1999. Margery A. Turner and Felicity

Skidmore, Eds. The Urban Institute.

2

 For more information on paired testing and its role in both measurement and enforcement, see A National

Report Card on Discrimination in America: The Role of Testing. 1999. Michael Fix and Margery Austin Turner, Eds.

The Urban Institute.
2

The Homeownership Testing Project

Building upon the experience and findings of previous testing efforts, the Department of

Housing and Urban Development (HUD) contracted with the Urban Institute to further refine and

apply methods for conducting paired testing at the pre-application stage of the mortgage lending

process. The Homeownership Testing Project (HTP) was designed to meet two basic

objectives. The first is to develop and refine a set of testing methodologies that will provide

guidance to others who might be interested in testing for lending discrimination. The second

objective of the Homeownership Testing Project is to produce reliable and representative

indicators about the nature and extent of differential treatment by home mortgage lending

institutions in two major metropolitan areas. Because the NFHA testing was designed primarily

for enforcement purposes, its findings do not provide statistically rigorous measures of the

incidence of differential treatment across lending institutions.3

 Thus, this project combines

research and enforcement goals, and seeks to advance both knowledge about the incidence of

mortgage lending discrimination and tools for conducting rigorous testing at the pre-application

stage.

Because of the complexity of the mortgage application process and the challenges it

presents for paired testing, we divided this effort into two basic stages―a pre-test stage and a

pilot stage. The pre-test stage was used to experiment with a fairly wide variety of paired

testing scenarios, and to assess the feasibility of testing several different sources of mortgage

financing information. A total of 78 tests were conducted in two markets―Orange County,

California and New Orleans, Louisiana. Although these pre-tests cannot be used to produce

statistical measures of the extent of adverse treatment, they do provide important insights about

the forms that mortgage lending discrimination may take and about methods for conducting

effective testing.

The pre-test stage explored the feasibility of conducting paired testing for six different

information sources, or “portals,” reflecting the range of possible sources of mortgage

information used by homebuyers:

• Conventional mortgage lenders serve large numbers of homebuyers directly. In addition,

homebuyers who access other portals, such as real estate agents, often end up meeting

with a lender at some point in the financing process.

 

3

 In particular, lenders were selected for inclusion in the NFHA study based on evidence suggesting that

they might be discriminating against minority customers. Thus, the findings are not necessarily representative of

treatment by all mortgage lenders. See Robin Smith and Michelle DeLair (1999). “New Evidence from Lender

Testing: Discrimination at the Pre-Application Stage,” in Margery Austin Turner and Felicity Skidmore (eds), Mortgage

Lending Discrimination: A Review of the Exisitng Evidence. Washington, D.C.: The Urban Institute.
3

• Sub-prime mortgage lenders are, according to some researchers and policymakers, the

fastest growing segment of the mortgage industry. This growth is due, in part, to the

increasing numbers of homebuyers unable to secure a conventional loan due to blemished

credit histories or other financial characteristics that will not meet the underwriting criteria of

conventional lenders.

• Mortgage brokers provide the same services as mortgage lending institutions, up to the

point of actually originating a loan. In some markets, and for some groups of borrowers,

they may be an important source of information on loan products. However, it is difficult to

develop a complete and reliable list of active mortgage in a metropolitan area from which to

draw a representative sample. Moreover, since many brokers do business primarily through

referrals, future testing will need to experiment with credible scenarios for testers to contact

brokers.

• Real estate agents who have their own financing arm can provide customers with financing

information, while other agents may refer homebuyers to outside mortgage brokers or

lenders for additional information or for the actual loan. They are important gateways to the

mortgage industry and influence which lenders many buyers contact. Conventional sales

testing of real estate agents can be expanded to assess information provided about

mortgage financing.

• New construction sales offices and mobile home dealers both provide customers with

information about financing terms and conditions. These portals serve limited, but

important, segments of the housing market. Testing for pre-application lending

discrimination by sales agents and mobile home dealers can and should be incorporated

into more comprehensive tests for discrimination by these actors. In other words, tests

designed to detect differences in unit availability, costs, amenities, and location can also

incorporate indicators of differences in financing amounts, terms, and conditions.

The pre-tests were also used to experiment with different testing scenarios. Some testers

indicated that they already had a particular house in mind while others were trying to find out

how much they could potentially afford. Some testers posed as well-qualified borrowers, while

others were assigned marginal qualifications. Some testers visited lenders in pairs, posing as

husband and wife inquiring together, while others conducted one-person visits, but indicated

that they were married.

This intensive exploratory effort concluded that rigorous paired testing is feasible for all

the portals we considered. Future research and enforcement efforts can and should explore

other portals, including mortgage brokers and referrals by real estate agents. The pre-test effort

also found that one of the most serious forms of adverse treatment that can be discerned by

paired testing at the pre-application stage is differential estimates of home price and total loan

amount. These estimates potentially play a major role in determining where people search for
4

housing and whether they decide they can afford to become homebuyers. Finally, pre-testing

highlighted the complexity and difficulty of mortgage lending testing. This type of testing

demands more from both testers and testing organizations than routine rental testing, and great

care must be taken with tester training, supervision, and record keeping, as well as with the

actual conduct of the tests themselves in order to achieve credible test results.

Lessons from the pre-test phase have been incorporated into a package of tools for

enforcement testing, produced as part of the Homeownership Testing Project.4

 In addition, the

pre-test experience informed the design of the project’s pilot stage, in which we conducted

approximately 250 paired tests of a representative sample of mortgage lending institutions in

Los Angeles, California and Chicago, Illinois. These tests followed a single, standardized set of

protocols in order to yield statistically rigorous measures of adverse treatment against African

Americans and Hispanics in the two metropolitan housing markets.

Overview of the HTP Methodology

Mortgage lending is a tremendously complex process. It can involve multiple information

providers, including real estate agents, brokers, and different types of lending institutions. Many

lenders offer a wide range of loan products, with varying interest rates, points, downpayment

requirements, repayment terms, and monthly costs. And a number of different customer

characteristics, including income, assets and debts, and credit history, help determine what

products are offered. This complexity makes it challenging to design and conduct paired tests

that reliably measure the incidence of differential treatment. It would be impossible to design a

single study protocol to capture all the possible variations, even at the pre-application stage.

The pilot phase of the Homeownership Testing Project focused on a single, clearly

defined scenario: A first-time homebuyer visits a mortgage lending institution requesting help in

figuring out a price range for housing, a loan amount for which he or she might qualify, and loan

products that might be suitable, to answer the basic research question: Do minorities receive

the same treatment and information as whites at the pre-application phase? This section

outlines the key elements of a rigorous paired testing methodology to measure the incidence

and severity of adverse treatment by mortgage lending institutions in two very different housing

markets.

All the tests conducted in the pilot phase of the Homeownership Testing Project

consisted of individuals visiting offices of mortgage lending institutions (including both

conventional and subprime lenders). We focused on mortgage lending institutions for two basic

reasons. First, mortgage lenders are an important source of information about loan products,

 

4

 See Fred Freiberg and Carla Herbig. 2001. Guide to Enforcement Tools for Fair Lending Testing.

Washington, D.C.: The Urban Institute.
5

terms, and affordability. Homebuyer surveys indicate that a majority of both minority and white

homebuyers speak to a mortgage lender at some point during the process of purchasing a

home. Even homebuyers who begin their search for information elsewhere are likely to end up

working with a mortgage lending institution at some point in the process. And second, mortgage

lending institutions can be identified and sampled with reasonable precision, in order to produce

statistically rigorous measures of adverse treatment. Our pre-test experience indicated that

designing valid samples of sufficient size for other information portals would be difficult.

All of the testers in the pilot phase posed as first-time homebuyers, making a general

uninformed request for information about how much house they could afford and what loan

products might be available to them. They visited lenders’ offices after calling to make an

appointment. Although most real homebuyers gather information by telephone, almost one third

report making personal visits to lenders, and our pre-test experience indicated that in-person

visits would be both feasible and credible. Moreover, we experimented in the pre-test phase

with a number of variations on this basic scenario and found that testers do not need to identify

a house, neighborhood, price range, or loan product in order to be provided with information by

mortgage lenders. Pre-testing also indicated that individuals posing as one member of a

married couple were treated as serious customers.

The pilot testing effort was implemented in two metropolitan areas, Chicago and Los

Angeles. In both of these sites, sufficient numbers of tests were conducted to produce

statistically rigorous estimates of differential treatment for blacks (compared to whites) and for

Hispanics (compared to Anglos). Four basic criteria guided the selection of these sites for the

study’s pilot phase:

• Strong local testing capacity. Although at least 100 fair housing groups nationwide

conduct paired testing, relatively few are likely to have the capacity to conduct large

numbers of lender tests to the rigorous standards of this project. Therefore, a principal

criterion for selecting sites was the availability of a local testing organization with strong

capacity. Chicago’sLeadership Council for Metropolitan Open Communities and the

Law Firm of Sharon Lybeck Hartmann in Los Angeles are well-established testing

organizations, with experienced testers and supervisors and the institutional capacity to

take on this challenging project.

• Geographic diversity. Although two sites obviously cannot be statistically representative

of metro areas nationwide, we wanted to select pilot sites that are sufficiently different to

reflect the diversity of metropolitan housing markets. Chicago and Los Angeles

represent different geographic regions and have very different housing market

conditions.

• Size and minority population. We limited our site selection to large metropolitan areas

with substantial black and Hispanic populations. Our pre-test experience reinforced
6

earlier assumptions that the anonymity of large urban areas helps shield a large-scale

testing effort from detection, and that a substantial minority population lends credibility to

minority testers. Chicago and Los Angeles have sufficient numbers of both African

Americans and Hispanics to permit testing for adverse treatment against both groups.

• Number of lenders. Given the volume of testing required to yield statistically rigorous

measures of differential treatment, it is critical that sites have a large number of

mortgage lenders with local offices. Otherwise, the project might risk detection by

conducting too many tests of the same lending institutions.

In both Chicago and Los Angeles we conducted tests for a representative sample of all

the mortgage lending institutions in the metropolitan area that accepted a significant number of

mortgage loan applications and had offices in the region that a first-time homebuyer could

realistically find and visit. Lending institutions with very large application volumes not only had a

high probability of selection, but could appear in the sample more than once. This sampling

strategy allows us to make statements about the incidence of differential treatment by primary

lending institutions in Chicago and Los Angeles that are directly accessible to first-time

homebuyers.

The treatment that potential homebuyers receive from lending institutions is highly

sensitive to the financial profiles they present. Therefore, the two members of each tester pair

were assigned virtually identical characteristics for all our pilot tests. In addition to the potential

problems posed by differences between testing partners, the variation in profiles across tester

pairs could influence the results of the pilot phase. Because the number of tests that could

reasonably be conducted in each site was relatively small (by statistical standards), we decided

to keep the tester profiles homogeneous. In other words, we limited the extent to which results

across tests might vary as a result of differences in income levels, assets and debts, or credit

histories. By reducing the potential variation between tests, we increased the statistical

reliability of findings from each site’s sample. All of the testers were assigned financial profiles

that qualified them for products targeted to borrowers with A- credit in their respective housing

markets. Their income and asset levels qualified them to purchase a median-priced house in

their metropolitan area, but they were asset constrained and had minor problems with their

credit history.

Organization of the Report

The remainder of this report consists of three chapters. Chapter 2 more fully explains

the sampling procedures and paired testing methodology implemented in the pilot phase of the

Homeownership Testing Project, building upon the experience gained in the pre-test phase.

Chapter 3 presents the results of the pilot phase, summarizing measures of differential

treatment for each of the racial/ethnic tracks in our two pilot sites: black/white tests in Los
7

Angeles; black/white tests in Chicago; Hispanic/Anglo tests in Los Angeles; and Hispanic/Anglo

tests in Chicago. Finally, Chapter 4 concludes the report with a summary of key findings from

both the pre-test phase and the pilot phase of the Homeownership Testing Project and their

implications for future research and enforcement efforts.
8

CHAPTER 2: THE HTP PAIRED TESTING METHODOLOGY

Conducting successful pre-application mortgage lending tests requires a highly

structured and controlled process that includes careful preparation prior to the test visits,

conscientious adherence to assignments during test visits, and thorough documentation of the

test experience after test visits are completed. This chapter first describes the methodology

used to select a representative sample of lending institutions for testing in each site. We then

present the test structure that was employed during the pilot phase, the assignment of tester

characteristics and instructions to testers, and the testing protocols used to conduct preapplication mortgage lending. We conclude by offering some general observations about

replicating the HTP testing protocols used during the pilot phase and issues related to

organizational capacity that are required to conduct effective pre-application mortgage lending

testing.

Sample of Lending Institutions

The Homeownership Testing Project was designed to (1) evaluate lender testing

methodologies in two pre-test sites and (2) estimate the incidence of discrimination by mortgage

lenders in two pilot sites. The distinct objectives of each of these two components imply

different guidelines for selecting the lenders to be tested.

The pre-test focused both on tester characteristics and on the entry points at which

testers gain access to information on mortgage products. At this stage, our goals were to

implement and refine testing forms and protocols to find out whether different testing scenarios

were effective and what types of differential treatment they could detect. To operationalize this

phase, lenders were selected on a case-by-case basis, to meet the needs of the specific test

scenario being explored. Lists of different types of lenders were gleaned from Home Mortgage

Disclosure Act data, telephone books, local newspapers, and home guides. In the pre-test,

there was no need to select a strictly random or representative sample of lenders.

Measuring the frequency of discrimination in the pilot phase required a more systematic

selection of lenders so that statistically reliable measures of the incidence of differential

treatment across a large number of tests could be produced. For these findings to be

generalized to particular types of local lenders (or a particular segment of a local lending

market), a sampling frame was required that fully reflected local mortgage lending activity and

provided an equal chance for each lender to be selected for testing. By using a rigorous

sampling frame, test results can answer questions about the incidence (or likelihood) of

discrimination for a given population in a particular situation. While the pre-test phase accessed

information about mortgage financing through a variety of portals such as mortgage lenders,

mobile home dealers, real estate agents, and new home builders, the pilot phase focused

strictly on prime and subprime mortgage lenders. To produce reliable estimates of treatment,
9

lender selection could not occur on a case-by-case basis and instead, was driven by an

overarching sampling frame of local mortgage lending institutions from which all entities to be

tested were selected.

No sampling frame is perfect; some compromises and caveats are inevitable. Ideally,

however, our goal was to construct an exhaustive (and mutually exclusive) list of all institutions

making mortgage loans in a metropolitan market from which all lenders to be tested would be

selected. To generate the closest approximation of such a list for the pilot phase, we used

information reported under the Home Mortgage Disclosure Act (HMDA) in 1998.

HMDA data are available for all mortgage companies owned by depository institutions

and independent mortgage companies that make at least 100 home purchase and/or refinance

loans in a given year. These data include information on the number of home mortgage loans

made by a lender, characteristics of applicants, and locations of prospective properties. HMDA

data for a specific locality list all lenders (within the proscriptions above) making loans for

properties in that locality.

In reviewing information from HMDA reports, it is apparent that many lenders are listed

who receive very few applications for mortgage loans. This raised concerns about the feasibility

of testing. Two people visiting such an office within a short period of time with a similar request

could be very unusual. To better ensure that testing activity would not prompt suspicion, we

selected for the sampling frame only those institutions that received at least 90 mortgage loan

applications in a given year. For Los Angeles, this meant 344 of 515 institutions were dropped

from the sampling frame. However, the remaining 171 institutions conducted the vast majority

of the application activity captured in HMDA (97 percent). Similarly, in Chicago we included in

the sampling frame 198 of 793 institutions covering 94 percent of application activity.

In order for a tester to make an in-person visit to a lending institution, the lender must

have a local office. Moreover, that office and its services must be accessible to the average

consumer without requiring membership or ties to a specific organization. For the sampling

frame to reflect these needs, we deleted from the list of all HMDA reporters those institutions (1)

without local offices and (2) unavailable to the average consumer (such as credit unions).

Once the list of lenders was pared down to those institutions receiving at least 90

applications a year that had an office available for a visit from an average consumer, institutions

were called to verify both the presence of a local office and the ability of a person to receive

mortgage information at that office. An institution without an office, that was out of business, or

that did not provide information to potential first-time borrowers, was deemed inaccessible and

unavailable for testing. In Los Angeles, this brought the number of lenders listed in HMDA who

were available for testing from 171 to 67. These 67 lenders conducted roughly half of the

mortgage loan application activity reported in HMDA. In Chicago, 106 lending institutions were
10

available for testing, reflecting 62 percent of the market’s HMDA-reported application activity

(Exhibit 2-1).

Exhibit 2-1: Sampling Frame

# of Institutions Application Volume % of HMDA Activity

LA Chicago LA Chicago LA Chicago

Full HMDA List 515 793 160,518 167,231 100 100

90+ Applications 171 198 155,730 157,002 97 94

Accessible 67* 106** 89,788 103,017 56 62

*In addition to deleting credit unions and lenders without local offices, this category included 35

institutions that were no longer in business, 7 wholesalers, and 4 that did not serve first-time

homebuyers.

**Again, in addition to deleting credit unions and lenders without local offices, this category included 2

institutions that were no longer in business, 15 wholesalers, 6 that did not serve first-time homebuyers,

and 5 that would only pre-qualify applicants over the phone.

The sampling frame used in the homeownership testing project can be generalized to

HMDA reporting lenders who receive at least 90 applications a year and are accessible to the

average consumer. While this sampling frame covers a significant portion of the mortgage

activity in a given locality, it does not reflect entities that do not report to HMDA. Because

independent mortgage companies making fewer than 100 homes loans do not have to report for

HMDA purposes, the sample excludes smaller independent mortgage companies. It is unclear

how many institutions and how much activity this misses in Los Angeles and Chicago. In

addition, mortgage brokers connect many prospective borrowers to potential lenders, but

because they do not actually make loans, they are not listed in HMDA data.

Research testing seeks to simulate as closely as possible the typical experience of a

mortgage credit seeker in the marketplace. Therefore, the ideal sampling frame is one which

duplicates the market entry points used by the average person when searching for mortgage

credit. The more closely the sampling frame resembles the credit seekers’ experience, the

more accurately it measures the treatment of typical potential borrowers.

Unfortunately, there is little in-depth research on how people search for credit including

potentially different search practices of racial and ethnic groups. While most research testing

efforts have used lenders as the entry point for mortgage credit, other housing professionals

such as real estate agents may provide significant gate keeper functions in the actual mortgage

market.

Moreover, different segments of the mortgage industry may position themselves to serve

niche markets of potential borrowers. To the extent that targeted marketing results in more
11

aggressive campaigns to individuals or communities of different racial groups, this could affect

the type of institutions used by borrowers.

To generate a sample of lenders for testing, institutions were sampled with replacement

from the restricted population of mortgage lending institutions, with the probability of selection

proportionate to volume of loan applications. This means that an institution with a high volume

of loan applications was more likely to be selected than one with a low volume of applications.

Moreover, large institutions could be drawn into the sample more than once, so that multiple

tests were conducted for these lenders. This approach resulted in a sample that includes both

large and small lenders but gives large lenders (which serve a larger share of the market) a

greater weight in the ultimate test results.6

 From the 67 institutions in the Los Angeles sampling

frame, 35 were selected for black/white testing and 34 for Hispanic/Anglo testing. In both

categories, the lenders selected accounted for half of the application activity captured in HMDA

data. In Chicago, the lenders selected for black/white testing cover 47 percent of the application

activity, while those tested for treatment of Hispanics and Anglos cover 51 percent.

Exhibit 2-2: Final Sample of Lending Institutions

# of Institutions Application Volume % of HMDA Activity

Lenders Tested LA Chicago LA Chicago LA Chicago

Black/White 35 49 81,031 78,655 50 47*

Hispanic/Anglo 34 51 80,447 85,214 50 51*

* During the course of testing, one institution in our sample merged with another large lender. HMDA

application volume for this lender is difficult to determine and is not represented in these totals.

While the sample was drawn based on lending institution, tests were conducted by

visiting individual branch offices, which were randomly selected from all of the institution’s local

offices. To select a branch office of a lender, a list of that lender’s local branches was compiled.

Urban institute staff made calls to local offices to verify addresses and determine which

branches potential borrowers could visit to receive information on mortgage loans.7

 Once the

list of local branches was reduced to those providing mortgage information, the branch to be

tested was selected randomly from the list. This process was conducted for each lending

institution in the sample.

 

6

 Separate samples were drawn for black/white tests and Hispanic/Anglo tests in each site. The medium- to

large-volume lenders were likely to be selected for testing in both samples because of their dominance in the local

market. However, each sample’s selection of smaller lenders was slightly (and randomly) different.

7

 Information on the volume of activity conducted by each branch was not available.
12

This sampling procedure makes it possible to generalize to the universe of large lending

institutions that maintain local offices where first-time homebuyers can inquire in-person about

mortgage financing options. It is important to recognize that small lenders, as well as lenders

that accept applications only by telephone or over the internet have been excluded from this

sample. Their treatment they provide to minority customers (relative to whites) may differ in

important ways from the institutions included in this study.

Basic Test Structure

Tests completed during the pilot phase were “paired test” structures involving two

individuals, both posing as part of a married household, who were matched on personal,

financial, and loan-seeking characteristics so that the primary difference between them was the

protected characteristic for which the test was conducted, namely race or national origin. Thus,

minority and white testers were paired to form test teams matched by gender and age, and both

male and female test teams were used to conduct Hispanic/Anglo and black/white paired tests

in Los Angeles and Chicago.

All testers posed as first time homebuyers beginning their search for a single-family

home, and called ahead to make an appointment with a loan specialist. During the visits,

testers requested assistance in determining the price range of housing they could afford and the

loan amount for which they might qualify. Testers were assigned detailed personal and financial

information which they were instructed to provide upon the lender’s request. If testers were

provided a recommended home price range and “pre-qualified” for a loan amount, they were

told to obtain as much information as possible about any available financing options for which

they qualify. Testers were instructed to end their visits by thanking the lender for any assistance

provided and to allow the lender to make any arrangements or suggestions for follow-up

contact.

Organizational Structure

Responsibility for the assignment and implementation of tests was shared between the

Urban Institute and the local testing organizations contracted in Los Angeles and Chicago. The

Urban Institute held a supervisory role, developing all sampling and testing methodologies,

training local housing groups and testers, reviewing completed tests, and analyzing testing data.

In addition, UI staff was responsible for sampling institutions and branches, and assigning

protected class and financial characteristics to tests. The local housing groups in each site

were responsible for the day-to-day implementation of testing. Teams of three managers, two

testing coordinators and one quality control supervisor, headed up the testing effort in each site.

Test coordinators hired testers, scheduled tests, assigned personal profiles, and briefed and

debriefed testers.
13

One important lesson from the pre-test experience was that implementing a large

number of lender tests and maintaining a consistent level of quality across all the tests required

considerable supervision at the local level. The complexity and quantity of information obtained

from lender tests required additional quality control beyond that which could be provided by test

coordinators. Someone at the local level was needed to provide oversight and a quality review

of all test materials immediately following the completion of each. Both local testing

organizations were funded and required to hire a quality control supervisor who could perform

this function. Beyond providing the quality review function and additional supervision of the

testing process, the quality control supervisors in each site also entered data into a central data

base as tests were completed. This local review and data entry process strengthened the

quality and consistency of testing―ensuring that testing protocols were followed and verifying

the accuracy of data on tester report forms.

Test Authorizations

The authorization to conduct a test was forwarded by the Urban Institute to test

coordinators in Los Angeles and Chicago via a Test Site Authorization Form. This form

specified the parameters of each test, including the institution and branch to be tested,

whether the testers should be white and black or Anglo and Hispanic, the timing and

sequence of the test visits, a test identifying number, and any special instructions. Prior

to forwarding a Test Site Authorization Form, UI staff made advance phone calls to the

institutions and branches selected through the sampling process. Given the fluctuations

of the lending market, these calls were necessary to confirm the existence of the branch,

make sure the branch was accessible to first-time mortgage seekers, and verify basic

contact information. The correct name, address and phone number for the test sites,

along with office hours (if known), were provided to the test coordinators on the Test Site

Authorization Form. In order to minimize suspicion and the risk of detection, the white or

Anglo tester was always instructed to visit prior to the minority tester. It was the

responsibility of the test coordinator to have testers make their visits within 24-120 hours

of each other.8

Tester Assignments – Characteristics and Instructions

In each site, test coordinators recruited and selected a pool of testers for participation in

the Homeownership Testing Project. Urban Institute staff reviewed the actual characteristics of

 

8

 During the course of the testing, the time spread was increased in some situations. It became apparent

that wider spacing was sometimes necessary to accommodate loan officers who maintain erratic work schedules or

to reduce the possibility of detection. While most tests were conducted within the 24-120 day spacing, some tester

visits were spaced between four to eight days apart.
14

these testers to ensure that all of them spoke fluent English and were competent to conduct

complex mortgage lending tests. Minority testers were all clearly identifiable as either African

American or Hispanic. As discussed earlier, the responsibility for developing testers’ assigned

characteristics was shared by the Urban Institute and the local test coordinators.

Personal profiles for the test assignments, including tester names and

addresses, personal family information, employers and occupations, and names of local

creditors such as local department stores and banks, were developed by the local test

coordinators based on their knowledge of the area. Extensive training was provided to

test coordinators on how to assign personal characteristics to testers. Instead of using

their own home telephone numbers, testers were assigned voice mail numbers so that

follow-up calls could be documented in a systematic manner throughout the testing

process. Local test coordinators assigned appropriate occupations, employers and

length of time on the job to every adult employed in the tester’s fictional household. No

tester was assigned to have less than two years on their current job and minority testers

were assigned a slightly greater length of employment than their white counterparts. In

addition, local test coordinators assigned testers a response to the question of how they

happened to hear about the lender, such as through the phone book, on the internet, or

from a sign or advertisement.

The financial characteristics assigned to testers were carefully developed and

controlled by Urban Institute staff. On every test, the minority tester was slightly more

qualified than the white tester. Income (individual and household), debts (monthly

payments and amounts owed), and assets (amounts in checking and savings accounts)

were provided to testers for every test. These amounts were assigned to ensure that the

qualifying ratios (front- and back-end) were very close for both testers, and well within

established norms. In Los Angeles, the financial profiles were based around an amount

slightly higher than the median single-family home price, while in Chicago, the financial

profiles were based around an amount slightly below the median home price. Financial

profiles were calculated backwards from the target home price to determine the income

and debt amounts necessary to qualify for that amount of home assuming a 30-year

conventional fixed-rate loan, at 8 percent interest, with a 5 percent downpayment (see

Annex A for more details on assigned financial characteristics). Six profiles were

developed for each MSA and were randomly assigned on each test. In all of the profiles,

the testers were somewhat asset constrained, meaning that their available

downpayment―not their qualifying ratios―limited the loan amount for which they

qualify. Income was distributed among wage earners in each household in the same

manner for both minority and non-minority testers.
15

In addition to their detailed financial characteristics, testers were assigned:

• Credit Information. All of the testers were assigned profiles with one or two minor

credit blemishes, usually a late payment of some kind. Testers were instructed to

offer details about their credit situation only if the subject of their credit standing or a

credit check was brought up by the lender during the visit.

• Education Level. Adults in the tester households were assigned comparable

education levels so that this information could be provided if requested by a lender.

• Current Rent/Period of Time at Current Residence. All testers posed as current

renters. The current rent paid by testers was assigned so that the minority tester

was always paying a little more in rent than the white tester. No testers resided at

their current residence less than three years and minority testers were assigned to

have resided at their current residence longer than their white counterparts.

These personal and financial characteristics as well as detailed instructions were

provided to each tester prior to conducting a test. The Urban Institute developed a set of

instructions or “script” that accompanied every test assignment. The instructions provided

testers with a set of tasks they were expected to accomplish during each test, including how to

make the call for an appointment, how to state the request, what questions to ask, and how to

end the visit. These instructions were designed to add an additional element of control to the

testing process so that consistent observations could be obtained about lender conduct. These

detailed instructions were consistent across all tests. Testers were provided with only one test

assignment at a time and were required to complete that test and document the experience

before receiving another test assignment.

Additional instructions were provided to all HTP testers in the Manual for Fair Lending

Testers and in the HTP Tester Training Sessions. Examples of additional instructions include:

• Testers must not bargain or negotiate for better financing terms;

• Testers must not provide a social security number or date of birth, and must

never authorize a credit check;

• Testers must not agree to pay for any services during the test visits;

• Testers must not state a preference for a particular type of financing, home

price, loan amount or monthly mortgage payment; and

• Testers must say that they are not currently working with any real estate

agent if asked by a lender.
16

Testing Protocols

In order to implement testing in a standardized manner across all tests conducted in Los

Angeles and Chicago, a set of testing protocols were developed for the pilot phase. Local test

coordinators were required to attend a week-long training session on these protocols and were

provided a training manual to use as a reference for testing protocols and procedures.

Test coordinators were required to meet with each tester, in person, prior to a test being

conducted. At this briefing, testers received their tester assignment and a set of instructions for

the upcoming test. During this initial briefing, the test coordinator was responsible for:

• reviewing the test assignment form with the tester and answering any

questions about assigned characteristics, instructions and/or testing

procedures;

• providing the tester with the appropriate test forms and materials (a

completed test assignment form, a blank test report form, a sufficient quantity

of test narrative forms, a notepad, etest coordinator.);

• helping the tester develop a “cheat sheet,” including household income,

indebtedness, and assets information (only the financial details that an actual

homebuyer might write down in preparation for meeting with a lender);

• clarifying any special instructions; and

• reviewing the procedures for completing the test forms and arranging to meet

for a debriefing following the completion of the test.

Test coordinators used a “Checklist for Briefing Testers” that was developed after the pre-test

phase to ensure greater consistency in the quality and content of the briefings. A “List of

Reminders to Testers” was included with every tester assignment packet. This list reviewed test

procedures and specific areas of tester conduct where mistakes or deviations from test

assignments were found to occur during the pre-test phase.

The testing protocols that testers were instructed to follow when conducting a test can

be summarized in five basic steps.

• Step #1 - Obtaining an Appointment. All HTP testers called to arrange “in person”

visits with lenders. Testers were provided detailed instructions on how to complete

such calls and how to avoid protracted conversations with loan officers over the

phone.

• Step #2 - Making the Initial Request (During the Visit). When testers arrived for their

appointments, their first step was to very clearly state (up to three times, if

necessary) that the purpose of their visit is to obtain some help in figuring out a price
17

range of housing that they might be able to afford and an estimated loan amount for

which they might qualify.

• Step #3 - Exchanging Personal/Financial Information. Testers were to be

forthcoming and provide income, debts, assets, credit information and other

personal and financial characteristics when requested by a lender. Testers were

instructed to be precise when providing their financial information and refer to their

“cheat sheets” if necessary. Under no circumstances, however, were testers to

provide a social security number or date of birth or authorize a credit check.

• Step #4 - Recording Information on Financing Options Recommended. Testers

were required to take notes and record information provided by the lender such as

suggested home price range, an estimated loan amount, and details about any

financing options recommended.

• Step #5 - Ending the Visit. Testers were instructed to thank the lender for any

assistance and allow the lender to suggest any follow-up contact.

Following every test visit, testers were instructed to complete a Test Report Form and a

Test Narrative Form. The Test Report Form records testers’ responses to questions about their

test experience and details the information that was provided by the lender (see Annex B). The

Test Narrative Form is a detailed, chronological, account of the test experience. Additional

narrative forms were completed by testers following any phone contact with a lender. Testers

were instructed to complete all forms as soon as possible following contact with a lender.

Testers completed the forms based on their recollection of what occurred during the test, and on

their review of notes taken and materials obtained during the test.9

All testers were instructed to contact their test coordinator after each test visit to arrange

a convenient time to meet as soon as possible following the completion of a test. The purpose

of this meeting or “debriefing” was to:

• collect all of the completed test forms, notes and all other materials obtained

by the tester;

• review the completed test forms (including the detailed narrative) to make

sure the forms were filled out completely and accurately and that they were

signed and dated;

 

9

 Because of the complexity of lender testing, the detailed narratives played a particularly important role in

quality control. Specifically, test coordinators, quality control supervisors, and Urban Institute staff all reviewed the

narrative reports to ensure that testers adhered to HTP protocols and accurately completed the more structured,

closed-ended Test Report Form.
18

• allow the test coordinator to clarify any issues that were raised by the test

reports and permit the tester to bring up any concerns about the test or

mention any deviations they may have made from the test assignment or

protocols; and

• aid the test coordinator in determining whether or not any immediate followup was necessary to complete the test (e.g. return visit, phone call).

Test coordinators used a “Debriefing Checklist” to be sure they reviewed the test

materials consistently with each tester. Testers were assigned local voice mail telephone

numbers so that the local test coordinators could record all follow-up contact received from

lenders. Following the tester training session, testers recorded personalized greetings on the

voice mail number assigned to them. Test coordinators monitored all assigned voice mail

numbers every three to five days for messages. To ensure the integrity of this data, messages

could only be retrieved by use of a passcode, which was only provided to Urban Institute staff

and the test coordinators. Messages received on tester voice mail numbers were transcribed by

the test coordinators in narrative form, and these documents became part of the completed test

file. Depending upon the nature of the follow-up contact, test coordinators and Urban Institute

staff determined whether it was appropriate for a tester to respond to the follow-up contact that

was initiated by the lender.

Replicating HTP Lender Testing Protocols

The testing approach, tester assignment process, testing protocols and test forms

described in this chapter were developed exclusively for use in this research project. Other

organizations that conduct testing may use different, though no less effective, approaches to

mortgage lending testing. Also, the protocols, procedures, training materials and test forms are

not intended to limit or restrict the performance of other types of lender testing or establish a

legal standard for testing that is conducted to enforce fair lending laws. Organizations that

conduct testing to investigate discriminatory lending practices as part of a fair lending

enforcement program should understand that these testing protocols and materials were

developed solely for use in this research project.

Pre-application mortgage lending testing, whether for research or enforcement, is a

complex, costly, and time-consuming activity. This study demonstrates a testing approach

which does yield credible and objective observations about lender conduct during the preapplication stage of the mortgage lending process. Organizations that have developed a strong

testing capability and expertise in the area of mortgage lending practices may find useful

applications for some of the information described in this chapter. Many organizations,

however, including some that routinely conduct other types of fair housing tests may not

currently possess the internal capacity, staff resources, technical knowledge, training, or testers
19

required to effectively implement pre-application mortgage lending tests. These organizations

are cautioned that careful planning, qualified personnel, additional training and substantial

resources may be required to overcome some of the significant implementation challenges

associated with the type of pre-application mortgage lending tests conducted here.
20

CHAPTER 3: PATTERNS OF UNEQUAL TREATMENT IN LOS ANGELES AND CHICAGO

Even at the pre-application stage, inquiries about mortgage products and terms are

complicated interactions and differences in treatment can take many forms. Based upon the

testing protocols and procedures described in chapter 2, we explored six major questions about

the information and assistance that lending institutions provided:8

1) Did testers receive the information they requested about loan amounts and house

prices they could afford?

2) How much were testers told they could afford to borrow and/or buy?

3) How many specific products were testers told about?

4) How much “coaching” did testers receive to help them qualify for a loan?

5) Did testers receive follow-up calls from lenders?

6) Were testers encouraged to consider FHA loans as an option?

In each of these areas, the experience of the white Anglo and minority members of a

tester pair were compared to determine whether both were treated equally, the white Anglo

tester was favored, or the minority tester was favored. We then calculated the incidence of

differential treatment across tests, to reflect the frequency with which equally qualified partners

were treated differently from one another when they visited lending institutions to inquire about

mortgage products. In addition, for some forms of treatment (such as maximum loan amount),

we calculated the magnitude, or severity of differential treatment, by comparing the average

amount quoted to white Anglo testers to the average amount quoted to minority testers.

This chapter explains these analysis methods in greater detail and then presents the

results, focusing in turn on each of the seven major questions listed above. Incidence and

magnitude measures are reported separately for each racial/ethnic track in our two pilot sites:

black/white tests in Los Angeles; black/white tests in Chicago; Hispanic/Anglo tests in Los

Angeles; and Hispanic/Anglo tests in Chicago. Along with these statistical results, we provide

narrative examples from individual tests, which illustrate the character and forms that unequal

 

8

 Testers also recorded the terms and conditions of specific loan product they were offered. Ideally, one

would want to compare terms and conditions for comparable loan products offered to both white and minority

customers. However, because HTP protocols called for testers to approach lending institutions with a very general

request for information, the product-specific information they received was very diverse. Similar products were listed

in different order and given different names, and testers did not always receive a complete set of terms and

conditions for every product discussed. Therefore, it is not possible to match products and compare terms and

conditions. Annex C presents an exploratory analysis that simply compares average terms and conditions across the

specific loan products discussed with testers.
21

treatment took when it occurred. Especially in testing scenarios as complex as mortgage

lending, these vignettes can help highlight the ways differential treatment can and does occur

on a case-by-case basis, whether or not the overall pattern of treatment systematically favors

one group.

Statistical Methods for Paired Testing Analysis

Data from paired testing can be used to construct three different types of measures: 1)

measures of the gross incidence of differential treatment; 2) measures of the net incidence of

differential treatment; and 3) measures of the severity of differential treatment. Each of these

measures is briefly outlined in turn.

A gross incidence measure is defined as the share of all tests in which the minority

receives less favorable treatment than his or her white Anglo partner. For example:

in xx percent of tests, the loan amount quoted to the white Anglo tester was

higher than the amount quoted to the minority tester.

Gross incidence measures provide very simple and understandable indicators of how often

minorities are treated less favorably than equally qualified white Anglos. However, there are

also cases in which minority testers receive better treatment than their white Anglo partners.

Thus, we can construct measures of the gross incidence of minority-favored treatment as well

as measures of the gross incidence of white-favored treatment.

Net incidence measures focus on the difference between these two gross incidence

measures by subtracting the gross incidence of minority-favored treatment from the gross

incidence of white-favored treatment on a given indicator. For example,

the share of tests in which white Anglo testers were quoted higher loan amounts

than their minority partners was xx percent greater than the share of cases in

which minorities were quoted higher loan amounts.

Therefore, a large net incidence measure would suggest that―even though minorities are

sometimes favored over white Anglos―unfavorable treatment of minorities is substantially more

prevalent. A small net incidence measure, on the other hand, suggests that while lenders do

not always provide comparable treatment to similar customers, they are just as likely to treat

minority customers favorably as white Anglo customers.

Some analysts of paired testing data assume that white Anglos do not experience

systematic discrimination, so that all cases of minority-favored treatment actually reflect random

error in the testing process. If this assumption is correct, then by subtracting cases of minorityfavored treatment from the cases of white-favored treatment, the net incidence measure

removes the element of random error and reflects the true incidence of discrimination against

minorities. However, if the assumption is incorrect (and systematic discrimination against white
22

Anglos does sometimes occur), then the net measure actually understates the incidence of

discrimination against minorities.

In the analysis presented here, gross incidence measures are reported for both whitefavored and minority-favored treatment. When these two gross measures are significantly

different from one another, then we conclude that a systematic pattern of differential treatment

based on race or ethnicity has occurred. If, on the other hand, the incidence of minority-favored

treatment is essentially the same as the incidence of white-favored treatment, we cannot

conclude that these differences are systematically based on race or ethnicity. Because our

sample sizes are relatively small, and our data may not be normally distributed, conventional

tests of statistical significance may fail to detect differences in treatment that are actually

significant. Therefore, we use the Sign Test to determine whether the incidence of whitefavored treatment is significantly different than the incidence of minority-favored treatment.9

It is important to note that even when no statistical pattern of race-based differential

treatment is observed, individual cases of discrimination may occur. Specifically, even if the

gross incidence of white-favored treatment is statistically insignificant, this does not mean that

discrimination never occurred, but only that the number of cases was too small to draw any

conclusions about systematic patterns across the sample as a whole. Similarly, for variables

where the gross measures of white-favored and minority-favored treatment is essentially equal,

there may in fact be instances of race-based discrimination, even though the overall pattern

does not systematically favor one group. Finally, even when treatment in one area appears to

favor either the white Anglo or the minority tester, this does not necessarily mean that the entire

test favors that tester. A qualitative review of the entire test file might be needed to assess the

overall outcome across multiple measures.

Gross and net incidence measures are complemented by measures of the severity of

differential treatment, which reflect the size or magnitude of differences in treatment between

minority testers and their white Anglo partners. For example,

on average, white Anglo testers were quoted loan amounts that were $xx

thousand higher than quotes received by their minority partners

Severity measures of this kind can only be constructed for forms of treatment that yield

continuous differences, such as dollars of loan amount or number of loan products. These

measures do not apply to simpler “yes/no” forms of treatment, such as whether a customer

 

9

 See Heckman, James J. and Peter Siegelman. 1993. The Urban Institute Audit Studies: Their Methods

and Findings in Clear and Convincing Evidence: Testing for Discrimination in America (Fix, Michael, and Raymond

J. Struyk eds.). Washington, DC: The Urban Institute Press; and Ramsey, Fred L. and Daniel W. Schafer. 1997. The

Statistical Sleuth: A Course in Methods of Data Analysis. Belmont, CA: Wadsworth Publishing Company.
23

receives any information or whether a customer is told she is qualified for any loan products.

Again because of our small sample sizes and the potential that the data are not normally

distributed, we have employed the more sensitive Wilcoxon Rank Sum Test to measure the

statistical significance of these severity measures.10

For all of the treatment indicators reported below, additional analysis stratified the tests

by three potentially important factors: whether both testers in the pair met with the same or

different loan officers, whether the lender was a prime or subprime institution, and whether

testers met with a minority agent. These stratified results are presented in Annex D. Note that

because of the small sample sizes, these comparisons are based on pooled data from both Los

Angeles and Chicago.

Although not mandated by our testing protocols, in approximately half of all tests both

testers in a pair happened to meet with the same loan officer. In the other half of tests, testers

met with different loan officers from the same branch of the same institution. The question of

whether testers saw the same loan officer is particularly important because it is often used by

lending institutions to explain away observed differences in treatment. When tests were

stratified by whether testers saw the same loan officer or different loan officers, the patterns of

differential treatment remained essentially the same. Therefore, there is no evidence that

statistically significant differences in treatment are more prevalent when the two testers see

different loan officers.

Tests were also stratified based on whether the lending institution has been identified by

HUD as a subprime lender. Although our sampling protocols did not mandate the inclusion of

subprime institutions, subprime institutions were tested to the extent that they were represented

among HMDA-reporters in our two sites. Tests at subprime institutions made up 10.5 percent of

all tests conducted in Los Angeles, and only 5 percent of tests completed in Chicago. Only 7.7

percent of all tests in the sample as a whole were conducted at subprime lending institutions.

Since statistical analyses on such a small number of tests are not reliable, a true stratification

analysis based on subprime/prime lenders cannot be completed. However, when subprime

tests were excluded from the analysis, patterns of differential treatment were essentially the

same for all treatment indicators. 11 Therefore, there is no evidence from this testing effort that

subprime lenders are either more or less likely to treat minorities unfavorably at the preapplication stage.

 

10 See Ramsey, Fred L. and Daniel W. Schafer. 1997. The Statistical Sleuth: A Course in Methods of Data

Analysis. Belmont, CA: Wadsworth Publishing Company.

11 To identify subprime lenders, we used HUD’s 1999 list of subprime lenders. More information about this

list, and a copy of the list itself (table A.1) can be found at: http://www.huduser.org/datasets/manu.html .
24

Finally, we explored differences in test results based upon the race or ethnicity of the

loan officer. In about 30 percent of all tests, testers met with a minority loan officer. One

hypothesis is that minority loan officers may treat minority customers more favorably than white

Anglos. In fact, we found that white-favored treatment occurred somewhat more frequently

when the loan officer was a white Anglo. But there was no increase in minority-favored

treatment when the loan officer was minority.

Question 1: Did testers receive the information they requested?

When testers visited mortgage lending institutions, they posed as first-time homebuyers

trying to obtain basic information about how much they might be able to borrow and how much

house they can realistically afford. Thus, our first group of treatment measures focus on

whether white Anglo and minority testers were equally successful in getting the basic

information they asked for. Exhibits 3-1 and 3-2 report the incidence of differential treatment for

four indicators in this category:

• Was a loan amount provided?

• Was a house price provided?

• Were specific financing options discussed?

• Were financial details exchanged (did the loan officer provide information about loan

amount and/or house price after receiving financial information from the tester)?

In addition, we constructed a summary score for this group of treatment indicators,

reflecting both the amount and quality of information testers received. This summary score

encompasses all four of the individual indicators that make up this category. It ranks and scores

the indicators to create an overall measure of the level of information received. Scores were

assigned to each tester as follows:

Summary

Score Treatment

5 Financial details were exchanged and the tester received a loan

amount or house price and specific financing options were discussed

4 Financial details were exchanged and the tester received a loan

amount or house price but no specific options were discussed

3 Financial details were not exchanged but the tester received a loan

amount or house price and specific financing options were discussed

2 Financial details were not exchanged and the tester received a loan

amount or house price but no specific options were discussed

1 The tester did not receive a loan amount or house price
25

Exhibit 3-1: Who Received the Information Requested?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Favored

% Black

Favored

Significance

Test

% White

Favored

% Black

Favored

Significance

Test

Loan amount provided 6.8 4.1 0.73 6.3 1.3 0.22

House price provided 6.8 6.8 1.00 5.1 3.8 1.00

Specific options discussed 6.8 5.5 1.00 6.3 0.0 0.06 *

Financial details exchanged 13.7 11.0 0.81 17.7 8.9 0.19

Overall info provided 9.5 8.1 1.00 8.9 5.1 0.55

* difference between % white favored and % black favored is statistically significant at a 90% confidence level or

 higher

** difference between % white favored and % black favored is statistically significant at a 95% confidence level or

 higher

Exhibit 3-2: Who Received the Information Requested?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Favored

%

Hispanic

Favored

Significance

Test

% Anglo

Favored

%

Hispanic

Favored

Significance

Test

Loan amount provided 11.4 1.3 0.02** 5.1 3.8 1.00

House price provided 10.1 1.3 0.04** 6.4 6.4 1.00

Specific options discussed 11.5 1.3 0.02** 5.7 8.6 0.75

Financial details exchanged 17.7 10.1 0.29 10.1 13.9 0.65

Overall info provided 12.7 1.3 0.01** 7.5 8.8 1.00

* difference between % Anglo favored and % Hispanic favored is statistically significant at a 90% confidence level

 or higher

** difference between % Anglo favored and % Hispanic favored is statistically significant at a 95% confidence level

 or higher

Then, for each test, scores were compared for the two testers to determine whether one was

favored overall. The tester with the higher summary score was considered favored in this area.

Testers received the same treatment most of the time on black/white tests in both

Los Angeles and Chicago. The incidence of both white-favored and minority-favored

treatment was almost always below 10 percent, with slightly higher incidences only in the
26

financial details exchanged category. For most indicators, there were no statistically significant

differences between the share of white-favored treatment and the share of minority-favored

treatment. The only statistically significant difference was found on specific financing options.

In 6.3 percent of black/white tests in Chicago, the lender discussed specific financing options

with the white tester but not the black tester in a pair. Black testers were never favored on this

treatment variable.

For Hispanic/Anglo tests, testers received the same treatment most of the time,

but Anglo testers were favored overall in Los Angeles. Results for the Hispanic/Anglo tests

are similar to black/white tests in that testers received the same treatment most of the time.

However, in Los Angeles, when differences did occur, they were significantly more likely to favor

Anglos than Hispanics. Specifically, the incidence of Anglo-favored treatment for loan amount

provided, house price provided, and specific financing options discussed was about 10 to 12

percent, while the incidence of Hispanic-favored treatment on these indicators was only about 1

percent. For the overall information summary score, Anglos were favored 12.7 of the time in

Los Angeles, while Hispanics were favored only 1.3 percent of the time. In Chicago, on the

other hand, the Hispanic/Anglo results

were comparable to the black/white

results discussed earlier, with no

significant pattern of differential treatment

favoring either Hispanics or Anglos.

Question 2: How much were testers

told they could afford?

In HTP, testers asked loan officers

for help in figuring out a price range for

their housing search and loan amounts for

which they would be qualified. Because

the minority and white Anglo members of each tester team were carefully matched with respect

to their financial characteristics, they should have received comparable estimates from the

lending institutions they visited. If minority homebuyers do not receive estimates of affordable

loan amounts and house prices that are comparable to those provided to white Anglo

homebuyers, their housing search may be discouraged or misdirected. They may conclude that

they cannot afford the kind of house they want, or they may limit their search to lower-priced

neighborhoods than they could in fact afford. The next group of treatment indicators focuses on

the maximum loan amounts and house prices that testers were told they could afford. This

Although a white male tester declined to authorize a

credit check, the loan officer pre-qualified him for a

maximum loan amount of $200,000. Four days later,

the same loan officer met with a Hispanic male tester

and refused to provide any information or service.

The loan officer told the Hispanic tester, “we usually

don’t meet with anyone without doing the credit

check, it would be a waste of time for you and for me”

and added “you can go to other lenders, they might

be able to help you without first pulling out your credit

as every mortgage corporation has a different policy.”

When the tester pressed one more time to obtain an

estimate, the loan officer stated, “I’m sorry, but I can’t

answer your questions without first pulling your

credit.”
27

analysis is limited to tests in which both testers were able to exchange accurate financial

information and obtain either a loan amount or a house price from the loan officer.12

The two members of a tester pair were often quoted different house prices or loan

amounts, but in general these differences did not systematically favor either white

Anglos or minorities.13 Exhibits 3-3 and 3-4 report the share of cases in which one tester was

quoted a higher loan amount or house price than his or her partner. For black/white tests in

both Los Angeles and Chicago, and for Hispanic/Anglo tests in Los Angeles no statistically

significant patterns of either white-favored or minority-favored treatment occurred.

However, for Hispanic/Anglo tests in Chicago, Hispanics testers were

systematically disfavored on loan amounts and house prices. Anglo testers were quoted

higher loan amounts or house prices than their Hispanic partners about 50 percent of the time,

while Hispanics were favored less than 20 percent of the time. In addition to this significant

incidence finding, the severity, or magnitude of loan amount and house price differences was

also statistically significant. The average

loan amount quoted to Anglo testers in

Chicago was $190,200. This amount was

almost $10,000 higher than the average of

$180,300 quoted to their Hispanic

partners. The average house price

suggested to Anglo testers―about

$200,000―was $12,000 higher than the

average suggested to comparable

Hispanic homebuyers―$188,000.

Question 3: How many loan products were testers told about?

In addition to loan amounts and house prices, our protocols called for testers to find out

about specific loan products that might meet their needs, including products recommended by

the loan officer. Therefore, we compared the experience of minority and white Anglo testers in

terms of the number of loan products described. Homebuyers presumably benefit when they

are able to obtain information about a variety of financing options. If minorities receive less

 

12 Results are the same when all tests in which both testers received a loan amount or house price are

included in the analysis, regardless of whether or not financial information was exchanged.

13 Although minority and white tester financial characteristics were closely matched, testing protocols did call

for the minority tester to be slightly more qualified that his or her white partner. The incidence indicators used for loan

amount and house price analysis incorporate a 5 percent threshold to account for the slight variations in

qualifications. More specifically, one tester in a pair was considered to be favored over the other if the house price or

loan amount he was quoted exceeded his partner’s by at least 5 percent.

A loan officer pre-qualified a white male tester for a

home price of $185,000 and a maximum loan amount

of $175,750. The loan officer also provided the white

tester with a “Pre-Qualification Certificate.” Eight

days later, the same loan officer met with an African

American male tester and pre-qualified him for a

home price of $165-175,000 and a maximum loan

amount of $160,000. The loan officer did not provide

the African American tester with a “Pre-qualification

Certificate.”
28

complete information about available loan products than comparable white Anglo homeseekers,

they may have to spend more time and effort to find out about available products, or they may

actually be unable to take advantage of beneficial products.

Exhibit 3-3: Who Was Quoted A Higher Loan Amount or House Price?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Favored

% Black

Favored

Significance

Test

% White

Favored

% Black

Favored

Significance

Test

Maximum loan amount 32.6 26.1 0.70 26.9 17.3 0.40

Maximum house price 36.2 27.7 0.58 25.5 21.6 0.84

Average Amounts White Black Significance

Test White Black SignificanceTest

Maximum loan amount $262,438 $266,484 0.92 $182,730 $183,122 0.28

Maximum house price $285,783 $291,186 0.89 $193,824 $193,312 0.56

* difference between % white favored and % black favored is statistically significant at a 90% confidence level or

 higher

** difference between % white favored and % black favored is statistically significant at a 95% confidence level or

 higher

Exhibit 3-4: Who Was Quoted A Higher Loan Amount Or House Price?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Favored

%

Hispanic

Favored

Significance

Test

% Anglo

Favored

%

Hispanic

Favored

Significance

Test

Maximum loan amount 42.9 32.7 0.51 51.9 19.2 0.01**

Maximum house price 44.0 30.0 0.32 51.0 13.7 0.00**

Average Amounts Anglo Hispanic Significance

Test Anglo Hispanic SignificanceTest

Maximum loan amount $271,570 $266,172 0.34 $190,193 $180,301 0.00**

Maximum house price $283,846 $284,737 0.64 $199,932 $188,055 0.00**

* difference between % Anglo favored and % Hispanic favored is statistically significant at a 90% confidence level

 or higher

** difference between % Anglo favored and % Hispanic favored is statistically significant at a 95% confidence level

 or higher
29

In many cases, white Anglo testers learned about more products than their

minority partners. (See Exhibits 3-5 and 3-6). In the Chicago black/white tests, lenders

discussed more products with white testers than their black partners 48.2 percent of the time,

while blacks were favored in only 21.4

percent of tests. Overall, whites learned

about an average of 2.95 products per

visit while blacks learned about only 2.43

products. The same pattern occurred for

Hispanic/Anglo tests in both Los Angeles

and Chicago. In Los Angeles, although the incidence of differential treatment was not

statistically significant, the magnitude measure shows that Anglos were told about an average of

2.92 products when Hispanic testers were told about only 2.33 (this difference is statistically

significant). In Chicago, both the incidence and severity measures were statistically significant

for the Hispanic/Anglo tests. Anglos were told about more products than their Hispanic partners

55.6 percent of the time, while Hispanics were only favored in 27.8 percent of tests. Moreover,

Anglos learned about an average of 2.83 products per visit, compared to only 2.44 products per

visit for Hispanics.

Question 4: How much “coaching” did testers receive?

One of the important services loan officers provide at the pre-application stage is

“coaching”―advice and assistance to potential homebuyers about how they can improve their

qualifications as borrowers. If minority customers receive less coaching than comparable white

Anglos, they may lack the information they need to correct problems that might prevent them

from obtaining mortgage financing. Thus, coaching represents a subtle but potentially important

form of differential treatment in the mortgage lending process at the pre-application stage.

In the Homeownership Testing Project, testers reported whether loan officers provided

advice or guidance about any of the following:

C paying down debts;

C debt consolidation;

C downpayment assistance (e.g., gift from family, special program, etc.);

C seller assistance (e.g., paying points, downpayment, closing costs, etc.);

C pre-qualification or pre-approval letter; or

C homebuying seminar.

A loan officer told a white male tester about five

possible loan options, including both conventional

and FHA products. Eight days later, the same loan

officer only discussed one loan option (an FHA

product) with the Hispanic tester.
30

Exhibit 3-5: Who Learned About More Products?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Favored

% Black

Favored

Significance

Test

% White

Favored

% Black

Favored

Significance

Test

Number of products 38.8 32.7 0.74 48.2 21.4 0.02**

Average Amounts White Black Significance

Test White Black SignificanceTest

Number of products 1.2.53 2.41 0.44 2.95 2.43 0.01**

* difference between % white favored and % black favored is statistically significant at a 90% confidence level or

 higher

** difference between % white favored and % black favored is statistically significant at a 95% confidence level or

 higher

Exhibit 3-6: Who Learned About More Products?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Favored

%

Hispanic

Favored

Significance

Test

% Anglo

Favored

%

Hispanic

Favored

Significance

Test

Number of products 51.9 34.6 0.23 55.6 27.8 0.04**

Average Amounts Anglo Hispanic Significance

Test Anglo Hispanic SignificanceTest

Number of products 2.92 2.33 0.03** 2.83 2.44 0.05*

* difference between % Anglo favored and % Hispanic favored is statistically significant at a 90% confidence level

 or higher

** difference between % Anglo favored and % Hispanic favored is statistically significant at a 95% confidence level

 or higher
31

All of these information items would help potential borrowers improve their prospects for

obtaining a mortgage loan. We compared the number of these items that were discussed with

each of the two members of a tester pair; exhibits 3-7 and 3-8 present the results of this

analysis.

Whites received more coaching than their minority partners in a statistically

significant share of the black/white tests in both Los Angeles and Chicago. In both

markets, whites were favored over half the time, while their minority partners were favored less

than one fourth of the time. In Los Angeles, white testers received advice about 1.42 topics per

visit compared to only 0.8 topics per visit for their black partners. In Chicago, white testers

received advice about 1.54 topics per visit compared to only 1.06 topics per visit for blacks.

The same pattern of unequal coaching occurred for Hispanic/Anglo tests in

Chicago, where Anglos were favored in

41.3 percent of the tests while their

Hispanic partners were favored in only

23.8 percent of tests. On average, Anglos

received information about 0.99 topics per

visit compared to only 0.64 topics per visit

for Hispanics. There was no statistically

significant pattern of unequal coaching for

Hispanic/Anglo tests in Los Angeles.

Question 5: Did testers receive followup contact?

After the pre-application visit ended, some testers received follow-up telephone calls or

mail from loan officers. These contacts may serve an important marketing and educational

function, providing additional information to potential homebuyers, encouraging them to

continue the homebuying process, and letting them know that they are valued customers. If

minorities receive less follow-up of this kind from lending institutions they visit, they may

become discouraged about their housing search or may take longer to find suitable mortgage

financing. Follow-up contacts to testers were systematically recorded, and we have compared

the number of contacts received by the white Anglo and minority members of each tester pair

(see Exhibits 3-9 and 3-10).

A loan officer informed a white male tester about the

possibility of having the seller pay the closing costs

and referred the tester to a real estate agent. In

making the referral, the agent stated “Let me give

you someone’s card. He’s a good guy. You’ll get

along with him, I know. He’s your age” and added

that “he’ll know what you are looking for.” The same

loan officer did not inform the African American male

tester about the possibility of a seller paying closing

costs and did not refer the tester to a real estate

agent.
32

Exhibit 3-7: Who Received More Coaching?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Favored

% Black

Favored

Significance

Test

% White

Favored

% Black

Favored

Significance

Test

Positive Coaching 43.2 18.9 0.01** 50.6 29.1 0.03**

Average Amounts White Black Significance

Test White Black SignificanceTest

Positive Coaching 1.84 1.3 0.01** 1.74 1.53 0.33

* difference between % white favored and % black favored is statistically significant at a 90% confidence level or

 higher

** difference between % white favored and % black favored is statistically significant at a 95% confidence level or

 higher

Exhibit 3-8: Who Received More Coaching?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Favored

%

Hispanic

Favored

Significance

Test

% Anglo

Favored

%

Hispanic

Favored

Significance

Test

Positive Coaching 39.2 36.7 0.80 40.5 15.2 0.01*

Average Amounts Anglo Hispanic Significance

Test Anglo Hispanic SignificanceTest

Positive Coaching 1.67 1.60 1.00 1.25 1.14 1.00

* difference between % Anglo favored and % Hispanic favored is statistically significant at a 90% confidence level

 or higher

** difference between % Anglo favored and % Hispanic favored is statistically significant at a 95% confidence level

or higher
33

Exhibit 3-9: Who Received More Follow-Up?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Favored

% Black

Favored

Significance

Test

% White

Favored

% Black

Favored

Significance

Test

Follow-Up Contact 5.4 5.4 1.00 12.7 1.3 0.01**

Average Amounts White Black Significance

Test White Black SignificanceTest

Follow-Up Contact 0.11 0.05 0.67 0.22 0.03 0.01**

* difference between % white favored and % black favored is statistically significant at a 90% confidence level or

 higher

** difference between % white favored and % black favored is statistically significant at a 95% confidence level or

 higher

Exhibit 3-10: Who Received More Follow-Up?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Favored

%

Hispanic

Favored

Significance

Test

% Anglo

Favored

%

Hispanic

Favored

Significance

Test

Follow-Up Contact 6.3 13.9 0.21 7.6 13.9 0.33

Average Amounts Anglo Hispanic Significance

Test Anglo Hispanic SignificanceTest

Follow-Up Contact 0.19 0.38 0.06* 0.16 0.28 0.21

* difference between % Anglo favored and % Hispanic favored is statistically significant at a 90% confidence level

 or higher

** difference between % Anglo favored and % Hispanic favored is statistically significant at a 95% confidence level or

 higher
34

Only the black/white tests in Chicago show a statistically significant pattern of

unequal follow-up. In all three other tracks of tests (black/white in Los Angeles and

Hispanic/Anglo in both Los Angeles and

Chicago), differential treatment was

commonplace, but it did not

systematically favor either white Anglos

or minorities. The Chicago results are

quite dramatic, however. White testers

received more follow-up than their black

partners in 12.7 percent of the tests, compared to only 1.3 percent of tests in which the black

testers were favored. On average, whites in Chicago received 0.22 follow-up calls per visit to a

lending institution, while blacks received only 0.03 follow-up calls per visit. In Los Angeles,

although the incidence of differential treatment was not statistically significant, the magnitude

measure suggests that Hispanics received more follow-up than their Anglo partners.

Specifically, Hispanics received an average of 0.38 follow-up contacts per visit compared to an

average of only 0.19 for Anglos (this difference is statistically significant).

Question 6: Were testers encouraged to consider FHA?

One type of product that lenders may suggest to prospective homebuyers is an FHA

loan. Because FHA guidelines are relatively flexible, they can serve some borrowers who do

not meet conventional underwriting standards. However, FHA loans can cost more than

conventional loans over the long term and may also permit lenders to charge higher fees.

Moreover, in Los Angeles, the testers’ financial characteristics qualified them for a conventional

loan above the FHA maximum, so that recommending FHA might unnecessarily constrain their

search options.

We constructed two variables that reflect the information provided by lenders about FHA.

The first indicates whether testers were encouraged to consider FHA, and includes cases in

which an FHA loan was among the specific products described to the tester as well as cases in

which the loan officer recommended FHA. The second variable indicates whether FHA was

explicitly discouraged, and includes cases in which the loan officer told testers that FHA would

not be a good option for them to consider. Exhibits 3-11 and 3-12 report the share of tests in

which FHA was either encouraged or discouraged.

Black testers in Los Angeles were substantially more likely to be encouraged to

consider FHA than their white partners. Specifically, FHA was encouraged for black testers

but not their white partners in 30.8 percent of tests, while FHA was encouraged to whites but not

blacks in only 7.7 percent of tests. None of the results in the remaining groups of tests

(black/white in Chicago and Hispanic/Anglo in Los Angeles and Chicago) provide evidence of

systematic differences in treatment on the basis of race or ethnicity. In general, white Anglos

After meeting with a white and a black tester, the

loan officer asked both for their addresses. The white

tester received follow-up contact in the form of a

business card and a brochure about an additional

financing option to consider. The black tester

received no follow-up mail or telephone calls.
35

and minorities received the same encouragement or discouragement, and when differences

occurred they did not favor either white Anglos or minorities at statistically significant levels.

Exhibit 3-11: Who Was Encouraged to Consider FHA?

Black/White Tests

Los Angeles Chicago

Treatment Indicators % White

Higher

% Black

Higher

Significance

Test

% White

Higher

% Black

Higher

Significance

Test

FHA encouraged 7.7 30.8 0.10* 9.8 14.6 0.75

FHA discouraged 7.7 3.8 0.63 12.2 4.9 0.45

* difference between % white higher and % black higher is statistically significant at a 90% confidence level or

 higher

** difference between % white higher and % black higher is statistically significant at a 95% confidence level or

 higher

Exhibit 3-12: Who Was Encouraged to Consider FHA?

Hispanic/Anglo Tests

Los Angeles Chicago

Treatment Indicators % Anglo

Higher

%

Hispanic

Higher

Significance

Test

% Anglo

Higher

%

Hispanic

Higher

Significance

Test

FHA encouraged 15.0 30.0 0.51 13.0 13.0 1.00

FHA discouraged 0.0 0.0 — 2.2 2.2 1.00

* difference between % Anglo higher and % Hispanic higher is statistically significant at a 90% confidence level or

 higher

** difference between % Anglo higher and % Hispanic higher is statistically significant at a 95% confidence level or

 higher
36

Summary of Statistically Significant Findings

Unequal treatment takes different forms in the two metropolitan areas and for the two

minority groups.

In Los Angeles --

C Blacks were offered less coaching than comparable white homebuyers, and were

more likely to be encouraged to consider an FHA loan.

C Hispanics were denied basic information about loan amount and house price, told

about fewer products, and received less follow-up compared to Anglo homebuyers.

In Chicago –

C Blacks were being denied basic information about loan amount and house price, told

about fewer products, provided less coaching, and received less follow-up than

comparable white homebuyers.

C Hispanics were quoted lower loan amounts or house prices, told about fewer

products, and provided less coaching than comparable Anglo homebuyers.

The frequency of unfavorable treatment varies considerably from one category to

another. For some categories, equal treatment occurred in the vast majority of cases, but when

differences occurred, the white Anglo was dramatically more likely to be favored than the

minority. For other treatment categories, differences in treatment occurred much more often,

but again were substantially more likely to favor the white Anglo than the minority.

One surprising aspect of these findings is the lack of consistency across either metro

area or racial/ethnic group. In other words, one might expect to see the same pattern of

treatment for both blacks and Hispanics in the same metropolitan area, or for blacks in both

metros and Hispanics in both metros. Instead, the pattern of statistically significant results is

somewhat different for each of the four tracks of testing we conducted. Given the differences

between Los Angeles and Chicago, however, this result may be less surprising than it first

appears. Los Angeles is a very high-cost housing market, with a large, diverse, and rapidly

growing Hispanic population and a smaller, more stable African American minority. In contrast,

Chicago is one of the nation’s most segregated housing markets, with a smaller Hispanic

population than black population. At the time our testing was underway (spring and summer of

2000), housing prices in the Chicago metropolitan area were considerably lower than in Los

Angeles. Given these structural differences, it seems quite plausible that perceptions of blacks

and Hispanics as potential homebuyers are different in each of the two metropolitan areas, and

that the treatment they receive relative to whites varies as a result.
37

CHAPTER 4: SUMMARY AND CONCLUSIONS

The Homeownership Testing Project was designed to accomplish both research and

enforcement goals, developing knowledge about the incidence of mortgage lending

discrimination and tools for conducting rigorous testing at the pre-application stage. Taken

together, the pre-test and pilot phases of this effort demonstrate that paired testing can be an

effective tool, both for enforcement and for research purposes, and that in two major housing

markets―Los Angeles and Chicago―African American and Hispanic homebuyers face a

significant risk of unequal treatment when they visit mortgage lending institutions to make preapplication inquiries.

Pre-Test Stage

The experience from our pre-testing effort demonstrates that rigorous paired testing is

feasible for all the portals we considered and can yield meaningful evidence of differential

treatment at the pre-application stage of the mortgage lending process. Testers can be trained

to present themselves as equally qualified homebuyers, and their requests for information at the

pre-application stage are treated seriously. Individual testers (both men and women) can

present themselves as members of married couples and receive serious consideration about

financing options.

Lending institutions, mortgage brokers, real estate agents, new construction sales

agents, and mobile home sales agents all have the potential to provide detailed information

about affordable loan amounts, loan products, and terms and conditions. They provide this

information even though testers refuse to undergo credit checks and do not offer their social

security numbers. In many instances, testers received written analyses of possible financing

options, which made it easier to record loan amounts and terms systematically. Our pre-test

experience demonstrates that rigorous paired testing of the lending market can yield observable

differences in treatment.

One of the most serious forms of discrimination that can be discerned by this type of

testing is differential estimates of home price and total loan amount. At the pre-test stage, we

found that when testers ask for information on how much house they can afford to buy, they are

given estimates of their affordable house price and total loan amount, and we observed

differences in these estimates that could be attributable to race or ethnicity. This is a very

serious form of differential treatment, since a homebuyer's understanding of how much he or

she can afford to borrow will determine what houses and neighborhoods are considered in the

housing search. Lower estimated loan amounts for minority homebuyers can significantly

restrict the range of housing and locational options open to them. This kind of differential

treatment cannot be detected by protocols that have testers state their price range or ask about
38

financing terms and conditions for a particular house. Therefore, we designed the pilot testing

protocols around a more open-ended inquiry about affordable price range and loan amounts.

Although differences in loan amount and house prices seem to be detectable through

paired testing, we found it more challenging to make product-by-product comparisons of loan

terms and costs. Because lenders do not use standardized labels for their various products,

and because they may present alternative products in a different order from one customer to the

next, it is difficult for testers to record the information they receive in a way that makes it easy to

compare terms and conditions for matching products. Based on our pre-test experience, we are

concerned that it may not be possible to design a large-scale research test that reliably detects

differences in loan terms and conditions. This limitation does not apply to enforcement testing,

where reports from a small number of tests can be analyzed carefully side-by-side to match

products that should have the same terms and conditions across testers.

It is important to recognize that mortgage lending testing is complex and demanding and

requires more from both testers and testing organizations than routine rental testing. Great care

must be taken with tester recruitment, training, supervision, and with systematic record keeping,

as well as with the actual conduct of the tests themselves. Otherwise, test results will not be

credible. Even organizations with a strong track record in rental testing are likely to find that

pre-application lending tests place unprecedented demands on their staff capacity. In particular,

testing supervisors must be extremely well-organized, with good attention to detail and time to

supervise testers closely. Testers should be briefed individually and in-person before and after

every test, and test report forms and narratives must be reviewed carefully to ensure that all of

the information a tester obtained is recorded completely and accurately. Testing organizations

should also have the capacity to make advance phone calls to obtain locations and office hours

for some lending institutions and to monitor follow-up phone messages from tested institutions.

In addition to the demands on testing supervisors, individual testers must commit

sufficient time to the effort to learn the basics of mortgage lending, to follow strict protocols, to

make extended test visits (during working hours), and to record their experiences completely.

We believe that the pools of "volunteer" testers generally relied upon by many fair housing

organizations may not be able to commit sufficient time and attention for lending testing. It may

be necessary to hire full- or part-time tester teams for the duration of a testing project. Unless

testers can make large blocks of time available to work during ”banking" hours, attend in-person

briefings before and after every test, conduct test visits that often last as long as an hour, and

complete lengthy report forms accurately, it is not possible to complete large numbers of tests in

any reasonable time period.
39

Pilot Stage

Based upon the experience gained in the pre-test stage, the pilot stage of HTP focused

on mortgage lending institutions, with all testers posing as reasonably well-qualified, first-time

homebuyers making preliminary inquiries about how much they could afford to borrow and what

types of loan products might be available. The pilot test results show that in both Los Angeles

and Chicago, African American and Hispanic homebuyers face a significant risk of experiencing

less favorable treatment than comparable whites when they visit mortgage lending institutions to

inquire about financing options. In the majority of cases, minorities and whites received equal

treatment, or when differences occurred, they were equally likely to favor the minority as the

white. Still, in both metropolitan areas, paired testing revealed statistically significant patterns of

unequal treatment that systematically favor whites.

Unequal treatment takes different forms in the two metropolitan areas and for the two

minority groups (see Exhibit 4-1).

In Los Angeles --

C Blacks were offered less coaching than comparable white homebuyers and were

more likely to be encouraged to consider an FHA loan.

C Hispanics were denied basic information about loan amount and house price, told

about fewer products, and received less follow-up than comparable Anglo

homebuyers.

In Chicago –

C Blacks were denied basic information about loan amount and house price, told about

fewer products, offered less coaching, and received less follow-up than comparable

white homebuyers.

C Hispanics were quoted lower loan amounts or house prices, told about fewer

products, and offered less coaching than comparable Anglo homebuyers.
40

Exhibit 4-1: Adverse Treatment of African American and Hispanic Homebuyers

Los Angeles Chicago Treatment Categories Blacks Hispanics Blacks Hispanics

Information requested U U

Loan amount and house price U

Number of products UUU

Coaching U UU

Follow-up contact U U

FHA encouraged U

U Unequal treatment favors whites or Anglos over blacks or Hispanics at a 90 percent level of

statistical significance or higher 

 No statistically significant differences in treatment

The frequency of unfavorable treatment varies considerably from one category to another. For

some categories, equal treatment occurred in the vast majority of cases, but when differences

occurred, the white was dramatically more likely to be favored than the minority. For other

treatment categories, differences in treatment occurred much more often, but again were

substantially more likely to favor the white than the minority.

Despite the variations in the forms that differential treatment takes, these findings

demonstrate that African American and Hispanic homebuyers in both Los Angeles and Chicago

face a significant risk of unequal treatment when they visit mortgage lending institutions to make

pre-application inquiries. Discriminatory treatment at this early stage in the mortgage lending

process has the potential to discourage some minorities from continuing their housing search, to

limit their search to lower cost homes than they could actually afford, and to prevent them from

choosing the most favorable loan products.

Future Paired Testing Research

While these findings indicate that unequal treatment of minority homebuyers at the preapplication stage of the mortgage lending process remains a significant problem, they do not tell

us how often adverse treatment occurs for other types of borrowers, making different types of

pre-application inquiries to other information providers. Thus, future testing efforts can and

should focus on other information sources, including mortgage brokers, new home sales agents,

mobile home dealers, and referrals from real estate agents. In addition, future studies should

include testers posing as less well-qualified borrowers as well as homebuyers with a particular

house price in mind.
41

The protocols implemented in the pilot stage of the Homeownership Testing Project are

by no means the only approach that makes sense, either for research or enforcement. And our

pilot testing protocols did not fully capture all of the forms of differential treatment that might

occur at the pre-application stage. As discussed in Chapter 3, our results suggest that minority

and white customers may be quoted different terms and conditions, but because our testers

approached lenders with such general inquiries about the amount they might be able to borrow,

it is not possible to match the products they were told about, or to determine whether they were

quoted different terms and conditions for comparable products. Protocols in which testers

approach lending institutions with a specific house price in mind, and request detailed

information about available loan products might provide more information about differential

treatment on loan terms and conditions.

In addition, some of our tests

provided anecdotal evidence that

lenders may encourage or discourage

customers from considering particular

neighborhoods. This may include

comments that steer minority customers

away from predominantly white areas or

that discourage whites from investing in

minority neighborhoods. However, the

HTP testing protocols were not designed

to systematically elicit or record comments of this kind or to analyze the characteristics of

communities discussed by loan officers. Future testing efforts should consider strategies for

systematically capturing and analyzing this type of differential treatment.

Based upon the results of the Homeownership Testing Project, we conclude that paired

testing at the pre-application stage of the mortgage lending process is both feasible and

effective for both enforcement and research purposes. Additional testing clearly should be

conducted, but because of the complexity of this kind of testing and the differences between

metro area results, we do not recommend a large-scale national study of adverse treatment at

the pre-application stage of the mortgage lending process. Instead, systematic studies should

be conducted on a site-by-site basis, with ample time and resources for effective training, test

coordination, and quality control.

Finally, the experience of HTP demonstrates that research and enforcement testing can

be linked without compromising the integrity of either. It is important to distinguish testing for

research from testing conducted primarily for law enforcement purposes. Testing for research

generally seeks to produce generalizable results regarding the prevalence of adverse treatment

for a market area or for the nation as a whole. To achieve these generalizable results, tests are

randomized using an accepted sampling frame, and quite large numbers of tests are conducted

A loan officer informed a white female tester that

Monterey Park is “Asian-infested” and that homes

quickly sell to relatives of existing Asian residents.

The loan officer told the white tester that she could

consider homes in Pasadena, Glendale, Silverlake

and the San Gabriel Valley and that she might want

to consider Alhambra because it has easy access to

the freeway and she could “live quietly in a safe

neighborhood.” The African American tester received

no comments or suggestions about specific

neighborhoods.
42

in order to support statistically significant comparisons. To generate reliable and objective

comparisons of minority and white experiences across a large number of tests, researchers

usually use highly structured reporting forms, with closed-ended, “check the box”-type items. By

contrast, the purpose of an enforcement test is to establish legal violations and to correct them

either through settlement or litigation. Testing for enforcement is often complaint driven, and

typically is targeted to a single firm or a selected set of firms. Enforcement testing often

requires multiple tests of a single firm, but generally does not involve the large number of tests

typical of research testing. As a consequence, enforcement testing report forms tend to be

much more open-ended, requiring test partners to provide greater narrative detail, rather than

check boxes. These forms are generally analyzed pair-by-pair by a knowledgeable analyst who

compares the treatment of test partners across all aspects of the encounter, including subjective

as well as objective information.

Although research and enforcement testing differ in significant ways, the distinctions

between the two should not be overdrawn. Both are based on the same core methodology and

protocols, differing primarily in the way test results are recorded and analyzed. Thus, innovative

testing methodologies developed for one application can be adapted for the other. Moreover,

randomized testing of large numbers of market transactions need not be limited to research.

They can and should be applied in targeting for enforcement. Furthermore, research and

enforcement testing can be conducted in tandem, yielding both market-wide estimates of the

incidence of adverse treatment and case-specific evidence of individual violations (evidence that

might be followed-up with enforcement oriented testing).

This project effectively balanced the interests of research and enforcement applications,

generating tools and procedures that can be adapted for either type of testing, and

demonstrating that research testing can help inform and target enforcement testing efforts,

without compromising the credibility of the research tests by using them directly for enforcement

or evidentiary purposes. If mortgage lending testing proceeds on a site-by-site basis, we

recommend the continuation of this linked approach, in which research testing helps provide a

market-wide context and targeting mechanism for enforcement testing.
ANNEX A:

ASSIGNED FINANCIAL

CHARACTERISTICS
House Price $ 250,000

Loan Amount 237,500 $ 

Closing Costs 2,613 $ 

Down Payment 12,500 $ 

Cash Assets Needed 15,113 $ 

Interest Rate 7.625%

Monthly Rate 0.6%

Loan Term 360

P&I ($1,681.01)

PMI-monthly 98.96 $ 

Taxes-monthly 375.00 $ 

tester 1 tester 2

Annual Income 98,490 $ 98,701 $ 

 Applicant 54,314 $ 61,592 $ 

 Co-Borrower 44,176 $ 37,108 $ 

Monthly Income 8,208 $ 8,225 $ 

Total Debt 12,217 $ 14,097 $ 

Monthly Debt 611 $ 705 $ 

Monthly Housing Expense 2,155 $ 2,155 $ 

Total Monthly Debt 2,766 $ 2,860 $ 

Cash Assets 14,961 $ 15,415 $ 

Current Rent 977 $ 1,035 $ 

Previous Rent 885 $ 836 $ 

DTI ratio 0.3370 0.3477

HSE ratio 0.2626 0.2620

ratio of co-borrower's income 0.4485 0.3760

g

House price is entered into calculator.

Chicago house prices ranged from: $175,000 to $195,000

LA house prices ranged from: $275,000 to $300,000

Interest Rate was assumed at 7.625%for Chicago a

 8.25% for LA.

Loan amount is always 95% of house price (assum

5% downpayment).

Closing costs determined by multiplying loan amo

a constant created from data in the pre-test phase.

Cash assets is the sum of closing costs and downp

PMI monthly determined as 0.5% of loan amount

divided by 12.

Taxes determined by national average constant

multiplied by loan amount.

Rents were a random number between estab

ranges in each city.

DTI (debt to income) ratio:

was a random number between 

established pre-qualification

 ratios, 33 and 35%.

HSE (housing expense) ratio:

was random number between

established pre-qualification

ratios, 25.5% and 26.5%.

Each tester had a slightly different qualifying ratio within these limits.

These qualifying ratios, plus loan amount drove the calculations for

testers’ monthly and yearly income and debt figures.

Ratio of tester’s income to spouse’s varied 

random number between 37.5% and 45%.

Cash Assets varied slightly for each tester

never more than 2 percentage points from 

in “cash assets needed”box.
ANNEX B:

TESTING REPORT FORM
TEST # TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

1

TEST REPORT FORM - LENDING

1. Tester: 

 

2. Test Site: 

Address: 

 

3. Day of Test: 4. Date of Test: / / 

5. What time was your appointment? 

6. Time Arrived at Test Site: 

7. Time Departed Test Site: 

8. Information on persons with whom you had contact during your visit [fill in all columns; circle

responses where appropriate]:

NAME OF EMPLOYEE

(if known)

RACE* NATIONAL

ORIGIN**

SEX AGE

(estimate)

TITLE AND/OR DUTIES YOU

OBSERVED EMPLOYEE

PERFORM

DESCRIPTION OF

EMPLOYEE

(Physical Characteristics)

a. 1

2

3

4

DK

 1

2

DK

M

F

b. 1

2

3

 1

2

DK

M

F
TEST # TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

2

4

DK

c. 1

2

3

4

DK

 1

2

DK

M

F

d. 1

2

3

4

DK

 1

2

DK

M

F

e. 1

2

3

4

DK

 1

2

DK

M

F

*1=White; 2=Black; 3=Asian; 4=Other; DK=Dont Know

**1=Hispanic; 2=Non-Hispanic; DK=Dont Know

9. Were you able to meet with a person who provides information on mortgage loan financing,

such as a loan officer, mortgage counselor, or some type of financing specialist, etc.

(Hereafter referred to as LS for lending specialist)? [check box]

 YES  NO

9a. If NO, why not? 

 

9b. If YES, with whom did you meet? [Circle letter from Question 8]

Employee Letter a b c d e

10. Did the LS indicate that you should first contact a real estate agent or locate a home prior

to obtaining information about financing from a lender? [check box]

 YES  NO

11. Did the LS tell you that you should contact another lender to inquire about financing? 

[check box]
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 3

 YES  NO

11a. If YES, what were the reasons given (if any)? 

 

 

11b. If YES, what other lenders, if any, were you told to contact? 

 

 

12. Did the LS say that a credit check would need to be conducted before any information about

mortgage financing could be discussed with you? [check box]

 YES  NO

13. Please indicate what information you provided during your visit and/or in any previous

phone contact [circle number]: 

Information Requested

I

Volunteered

I Provided

in Writing

Was Not

Obtained

a. Your Name 1 2 3 4

b. Current Address 1 2 3 4

c. Telephone Number 1 2 3 4

d. Marital Status 1 2 3 4

e. Number of Children 1 2 3 4

f. Source(s) of Your Income 1 2 3 4

g. Source(s) of Income for Others in Household 1 2 3 4

h. Amount of Your Income 1 2 3 4

I. Amount of Income for Others in Household 1 2 3 4

j. Your Current Place of Employment 1 2 3 4
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 4

k. Current Place of Employment for Others in

the Household

1 2 34

l. Your Length of Employment 1 2 3 4

m. Length of Employment for Others in

Household

1 2 34

n. Education Level You Completed 1 2 3 4

o. Education Level of Others in Household 1 2 3 4

p. Your Credit Standing 1 2 3 4

q. Credit Standing of Others in Household 1 2 3 4

r. Household Indebtedness 1 2 3 4

s. Household Assets 1 2 3 4

t. Amount of Available Down Payment 1 2 3 4

u. Current Housing Situation (Own or Rent) 1 2 3 4

v. Current Rent 1 2 3 4

w. Length of Time at Current Address 1 2 3 4

x. Reason for Moving 1 2 3 4

y. Price Range Sought 1 2 3 4

z. Veteran’s Status 1 2 3 4

aa. Social Security Number 1 2 3 4

bb. Date of Birth

14. Did the LS tell you that you were NOT qualified for any of the mortgage loan products

offered by their institution? [check box]

 YES  NO

14a. If YES, what were the reasons given, if any? 

 

 
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 5

15. Did the LS tell you that you were NOT qualified to receive ANY mortgage financing at all?

[check box]

 YES  NO

15a. If YES, what were the reasons given, if any? 

 

 

16. Did the LS discuss any of the following with you? [check all that apply]

 PAYING DOWN DEBTS

 DEBT CONSOLIDATION

 DOWNPAYMENT ASSISTANCE (e.g., gift from family, special program, etc.)

 CO-SIGNER

 SELLER ASSISTANCE (e.g., paying points, downpayment, closing costs, etc.)

 PRE-QUALIFICATION LETTER

 HOMEBUYING SEMINAR

 CREDIT COUNSELING CLASS

 NONE OF THE ABOVE WERE DISCUSSED

16a. For any items discussed, please describe what you were told: 

 

 

 

 

 

 
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 6

 

 

 

 

 

 

17. Did the LS tell you the TOTAL loan amount for which you could qualify? [check box]

 YES  NO

17a. If YES, what was the amount? 

17b. If NO, what reasons were given for not providing you with a loan amount for which you

could qualify? 

 

 

18. Did the LS tell you what home price or price range you could afford? [check box]

 YES  NO

18a. If YES, what was the price or price range? 

18b. If NO, what reasons were given for not providing you with a home price or price range that

you could afford ? 

 

 
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 7

19. Did the LS discuss financing options or loan products for which YOU could qualify? [check

box]

 YES  NO

19a. If NO, what reasons, if any, were given for not providing you with information about

financing options or loan products for which you could qualify? 

 

 

 

19b. If YES, please fill in the boxes on the chart below. Write in the information for loan

products described as financing options for which you could qualify.

Name of Loan

Program

(if known)

1. 2. 3. 4. 5.

Loan Type

 C=Conventional

 F=FHA

 O=Other

Estimated Loan

Amount to be

Financed ($)

Estimated Monthly

Payment ($) 

Amount of Downpayment Required ($)

Percent Downpayment Required (%)

Interest Rate

Quoted (%)

Fixed Rate or

Variable Rate (F/V)

Length of Loan

(in Years)

Number of Points,

if any
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 8

Estimated Total

Closing Costs ($)

Will Need PMI?

(Y/N)

Other Terms and

Conditions

20. For any of the financing options in 19b, did the LS discuss the possibility of obtaining a

second loan or trust to finance your downpayment? [check box]

 YES  NO [If NO, skip to Q. 21]

20a. If YES, for which loan product(s) was this option discussed? [circle number from 19b]

12345

20b. What were you told would be the amount to be financed on the second loan or trust?

Amount Loan Product [circle number from 19b]

 12345

 12345

20c. What was the interest rate quoted on the second loan or trust?

Interest Rate Loan Product [circle number from 19b]

 12345

 12345

20d. What was the length of loan (in years) for the second loan or trust?
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 9

Length of Loan (in years) Loan Product [circle number from 19b]

 12345

 12345

21. Who was the primary person who provided the information for Question 19b? [circle

letter from Question 8]

Employee Letter a b c d e

22. Were you told about any other financing options that you did not record on Question

19b? [check box]

 YES  NO

22a. If YES, what options were mentioned? 

 

23. Did the LS make negative or disparaging remarks about any loan products (either those

identified in Question 19b or any others)? [check box]

 YES  NO

23a. If YES, which loan products? [circle number from 19b or Other]

1 2 3 4 5 Other

23b. What remarks were made? 

 

 

 

24. Did the LS strongly recommend any of the loan products identified in Question 19b?

[check box]

 YES  NO

24a. If YES, which loan products? [circle number from 19b]
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 10

 12 3 4 5

24b. What remarks were made? 

 

 

25. Did the LS ask you to fill out a mortgage loan application? [check box]

 YES  NO

26. Did the LS offer to assist you in completing a mortgage loan application? [check box]

 YES NO

27. Did the LS inform you that a fee would have to accompany an application for financing?

[check box]

 YES NO

27a. If YES, what were you told the amount of the fee would be? 

28. Did the LS tell you how long the application process would take? [check box]

 YES NO

28a. If YES, how long were you told it would take? [enter time in

number of days]

29. Did the LS make comments to you about the characteristics or composition of any of

the following? [check all that apply]

 HOUSING DEVELOPMENTS

 NEIGHBORHOODS/AREAS

 OTHER CUSTOMERS

 OTHER EMPLOYEES

 NO COMMENTS WERE MADE

29a. For any comments made about items checked, please describe what you were told: 
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 11

 

 

 

 

30. Did the LS make any negative comments about any of the following? [check all that

apply]

 HOUSING DEVELOPMENTS

 NEIGHBORHOODS/AREAS

 REAL ESTATE AGENTS/FIRMS

 OTHER LENDERS

 MORTGAGE BROKERS

 OTHER CUSTOMERS

 OTHER EMPLOYEES

 NO COMMENTS WERE MADE

30a. For any comments made about items checked, please describe what you were told: 

 

 

 

 

 

 

31. Did the LS refer you to or recommend a particular real estate agent or real estate firm?

[check box]

 YES  NO

31a. If YES, which one(s)? 

 

 

 

32. Please indicate whether you obtained any of the following materials during your visit

[circle number]:
T TEST COORDINATOR: 

TESTER NUMBER: 

April 25, 2002 DRAFT

TEST # 12

Material Not Obtained Volunteered I Requested

1. Business Card 0 1 2

2. Loan Application 0 1 2

3. Brochure(s) 0 1 2

4. Information on Loan Products 0 1 2

5. Pre-qualifying Worksheet 0 1 2

6 . Other Printed or Written Materials

 [specify]

 

 

0

0

0

1

1

1

2

2

2

33. Did the LS make any arrangements with you for future contact? [check box]:

 YES  NO

 33a. If YES, what type of arrangements were made? [check box]:

 I WAS ASKED TO CONTACT THE LS

 THE LS SAID HE/SHE WOULD CONTACT ME

 OTHER 

STATEMENT OF TESTER

I prepared this test report form and attest by my signature below that it is, to the best of

my recollection, a true and accurate account of the events that took place during a test in

which I participated:

 

 Signature Date Time 
ANNEX C:

TERMS AND CONDITIONS
Annex C: Terms and Conditions

Differences in Terms and Conditions

Black/White Tests

Los Angeles Chicag

Treatment Indicators % White Higher % Minority

Higher

Significance Test % White Higher % Minori

Higher

# products w/variable rates 20.4 32.7 0.33 35.7 14.3 # products w/PMI required 30.6 46.9 0.26 46.4 19.6 Avg downpayment percent 34.7 38.8 0.87 33.9 28.6 Avg points 32.7 30.6 1.00 33.9 16.1 Avg closing costs 36.7 36.7 1.00 46.4 21.4 Avg interest rate 34.7 40.8 0.74 42.9 26.8 Avg monthly payment rate 44.9 53.1 0.67 53.6 44.6 

 Differences in Terms and Conditions

Hispanic/Anglo Tests

Los Angeles Chicag

Treatment Indicators % White Higher % Minority

Favored

Significance Test % White Higher % Minori

Favored

# products w/variable rates 38.5 17.3 0.06* 29.6 9.3 # products w/PMI required 34.6 34.6 1.0 44.4 16.7 Avg downpayment percent 50.0 26.9 0.08* 31.4 27.8 Avg points 36.5 23.1 0.28 20.4 11.1 Avg closing costs 55.8 38.5 0.25 50.0 35.2 Avg interest rate 46.2 36.5 0.54 31.5 37.0 Avg monthly payment rate 53.8 44.2 0.58 51.9 48.1 
Differences in Terms and Conditions for Loan Products Discussed

These results reflect a fairly high level of variation in the terms and conditions discussed with prospective 

some statistically significant differences on the basis of race or ethnicity. For black/white tests, we find no statispatterns of differential treatment in Los Angeles, but in Chicago, whites were more likely to be told about producinterest rates, and more likely to be told about products requiring private mortgage insurance. In addition, whitebe quoted higher points and higher closing costs on average. For Hispanic/Anglo tests in Los Angeles, Anglos told about products with variable interest rates and more likely to be quoted higher average downpayment perce

Hispanic/Anglo tests in Chicago, Anglos were more likely to be told about products with variable rates and produprivate mortgage insurance.

It is not clear whether these differences favor the white Anglo customer or the minority customer. On the 

the results seem to suggest that white Anglos are being told about more costly loan products. But given some oreported here, these differences may reflect a greater diversity of products being offered to white Anglo customelearning about more products that require private mortgage insurance might reflect adverse treatment (since mo

costly and may not be needed by a well-qualified borrower) or it might reflect favorable treatment (since learning private mortgage insurance provides a wider range of options to consider). Likewise, a higher average downpareflect less favorable terms, or an effort on the part of the lender to get the tester into a more expensive house oof money to be financed. Thus, we can only conclude from the results of this testing effort that statistically signidifferences in terms and conditions do occur, both in Los Angeles and in Chicago.
ANNEX D:

POOLED AND STRATIFIED

RESULTS
Annex D: Pooled and Stratified Results

Annex D-1: Pooled Results

Who Received the Information Requested?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Loan amount provided 6.7 2.7 0.18

House price provided 6.0 5.3 1.00

Specific options discussed 7.0 2.8 0.18

Financial details exchnged 8.6 7.2 0.69

Overall info provided 9.2 6.6 0.54

Who Received the Information Requested?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Loan amount provided 8.2 2.5 0.05**

House price provided 8.2 3.8 0.17

Specific options discussed 8.7 4.7 0.26

Financial details exchnged 8.8 4.4 0.13

Overall info provided 10.1 5.0 0.10

 Who Was Quoted A Higher Loan Amount or House Price?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Maximum loan amount 29.6 21.4 0.26

Maximum house price 30.6 24.5 0.50

Average Amounts White Minority Significance Test

Maximum loan amount $219,458 $222,302 0.26

Maximum house price $237,481 $239,874 0.74
Who Was Quoted A Higher Loan Amount or House Price?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Maximum loan amount 51.0 22.5 0.001**

Maximum house price 48.0 21.6 0.001**

Average Amounts White Minority Significance Test

Maximum loan amount $232,180 $219,546 0.03**

Maximum house price $243,111 $233,726 0.01**

Who Learned About More Products?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Number of products 43.8 26.7 0.04**

Average Amounts White Minority Significance Test

Number of products 2.75 2.42 0.05**

Who Learned About More Products?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Number of products 54.2 30.8 0.01**

Average Amounts White Minority Significance Test

Number of products 2.87 2.37 0.01**
Who Received More Coaching?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Positive Coaching 46.7 24.3 0.001**

Average Amounts White Minority Significance Test

Positive Coaching 1.72 1.39 0.01**

Who Received More Coaching?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Positive Coaching 36.5 26.4 0.11

Average Amounts White Minority Significance Test

Positive Coaching 1.43 1.41 1.00

 Who Received More Follow-Up?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Follow-Up Contact 8.6 3.3 0.10**

Average Amounts White Minority Significance Test

Follow-Up Contact 0.14 0.04 0.10**

Who Received More Follow-Up?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Favored % Minority Favored Significance Test

Follow-Up Contact 6.9 15.1 0.03**

Average Amounts White Minority Significance Test

Follow-Up Contact 0.18 0.35 0.04**
Who Was Encouraged to Consider FHA?

Black/White Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Higher % Minority Higher Significance Test

FHA encouraged 9.0 20.9 0.12

FHA discouraged 10.4 4.5 0.34

Who Was Encouraged to Consider FHA?

Hispanic/Anglo Tests

Los Angeles and Chicago: Pooled Treatment Indicators

% White Higher % Minority Higher Significance Test

FHA encouraged 14.9 17.9 0.68

FHA discouraged 1.5 1.5 1.0
Annex D-2: Prime Lenders

Who Received the Information Requested?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 6.7 2.7 0.18 7.3 1.5 House price provided 6.0 5.3 1.00 6.6 4.4 Specific options discussed 7.0 2.8 0.18 7.7 1.5 Financial details exchnged 8.6 7.2 0.69 9.4 5.8 Overall info provided 9.2 6.6 0.54 10.1 5.0 

Who Received the Information Requested?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 8.2 2.5 0.05** 6.1 2.7 House price provided 8.2 3.8 0.17 6.1 4.1 Specific options discussed 8.7 4.7 0.26 6.5 5.1 Financial details exchnged 8.8 4.4 0.13 7.4 4.7 Overall info provided 10.1 5.0 0.10 7.4 5.4 
 Who Was Quoted A Higher Loan Amount or House Price?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 29.6 21.4 0.26 28.9 21.1 Maximum house price 30.6 24.5 0.50 31.5 22.5 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $219,458 $222,302 0.26 $217,889 $220,56Maximum house price $237,481 $239,874 0.74 $236,266 $235,82

Who Was Quoted A Higher Loan Amount or House Price?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 51.0 22.5 0.001** 48.5 25.8 Maximum house price 48.0 21.6 0.001** 50.0 20.8 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $232,180 $219,546 0.03** $231,918 $218,99Maximum house price $243,111 $233,726 0.01** $242,874 $232,43
 Who Learned About More Products?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 43.8 26.7 0.04* 43.2 27.4 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.75 2.42 0.05* 2.78 2.52 

Appendix 2-6: Who Learned About More Products?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 54.2 30.8 0.01** 54.0 31.0 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.87 2.37 0.01** 2.87 2.38 
Who Received More Coaching?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 46.7 24.3 0.001** 46.8 25.2 

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.72 1.39 0.01** 1.72 1.34 

Who Received More Coaching?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 36.5 26.4 0.11 35.1 25.7 

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.43 1.41 1.00 1.40 1.41 
Who Received More Follow-Up?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 8.6 3.3 0.10** 8.6 3.6 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.14 0.04 0.10** 0.14 0.04 

Who Received More Follow-Up?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 6.9 15.1 0.03** 6.1 15.5 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.18 0.35 0.04** 0.17 0.35 
Who Was Encouraged to Consider FHA?

Black/White Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 9.0 20.9 0.12 4.9 23.0 FHA discouraged 10.4 4.5 0.34 11.5 4.9 

Who Was Encouraged to Consider FHA?

Hispanic/Anglo Tests

Both Sites: All Lenders Both Sites: Prime L

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 14.9 17.9 0.68 15.9 19.0 FHA discouraged 1.5 1.5 1.0 1.6 1.6 
Annex D -3: Same or Different Loan Officer

Who Received the Information Requested?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 7.9 1.3 0.13 5.5 4.1 House price provided 2.7 4.0 1.00 9.5 6.8 Specific options discussed 6.8 0 0.06 7.2 5.8 Financial details exchnged 6.6 2.6 0.45 10.7 10.7 Overall info provided 7.9 5.3 0.75 10.7 8.0 

Who Received the Information Requested?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 14.6 4.2 1.00 14.6 4.2 House price provided 12.5 6.3 0.69 12.5 6.3 Specific options discussed 15.2 6.5 1.00 15.2 6.5 Financial details exchnged 10.4 4.2 0.22 10.4 4.2 Overall info provided 16.7 8.3 0.73 16.7 8.3 
 Who Was Quoted A Higher Loan Amount or House Price?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 21.8 9.1 0.14 39.5 37.2 Maximum house price 28.1 17.5 0.33 34.1 34.1 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $219,147 $218,839 0.26 $219,869 $226,70Maximum house price $237,866 $233,764 0.29 $236,960 $248,06

Who Was Quoted A Higher Loan Amount or House Price?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 44.0 24.0 0.09** 51.9 26.9 Maximum house price 46.0 18.0 0.01** 50.0 25.0 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $229,081 $213,796 0.17 $234,949 $225,18Maximum house price $241,333 $229,657 0.07** $244,728 $237,56
 Who Learned About More Products?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 46.7 25.0 0.05** 40.0 28.9 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.72 2.35 0.07** 2.80 2.51 

Who Learned About More Products?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 54.9 33.3 0.10** 53.6 28.6 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.84 2.37 0.14 1.12 1.30 
Who Received More Coaching?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 44.7 26.3 0.06** 49.3 22.7 

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.67 1.39 0.11 1.80 1.40 

Who Received More Coaching?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 32.9 27.1 0.54 39.3 25.80.2

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.35 1.5 0.36 1.49 1.33 
 Who Received More Follow-Up?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 5.3 2.6 0.69 12.0 4.0 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.07 0.04 0.69 0.21 0.04 

Who Received More Follow-Up?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 5.7 15.7 0.12 7.9 14.6 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.19 0.36 0.12 0.17 0.34 
Who Was Encouraged to Consider FHA?

Black/White Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 2.8 19.4 0.07** 16.1 22.6 FHA discouraged 8.3 8.3 1.00 12.9 0 

Who Was Encouraged to Consider FHA?

Hispanic/Anglo Tests

Both Sites: Met with Same Loan Officer Both Sites: Met with Diff

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 12.5 12.5 1.00 17.1 22.9 FHA discouraged 3.1 3.1 1.00 0 0 
Annex D-4: White or Minority Loan Officer

Who Received the Information Requested?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 2.9 2.9 1.00 9.5 0 House price provided 4.2 5.6 1.00 2.4 2.4 Specific options discussed 3.1 1.5 1.00 9.8 0 Financial details exchnged 7.0 4.2 0.73 7.1 7.1 Overall info provided 5.6 7.0 1.00 9.5 2.4 

Who Received the Information Requested?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Loan amount provided 14.6 4.2 0.69 14.6 4.2 House price provided 12.5 6.3 1.00 12.5 6.3 Specific options discussed 15.2 6.5 1.00 15.2 6.5 Financial details exchnged 10.4 4.2 1.00 10.4 4.2 Overall info provided 16.7 8.3 1.00 16.7 8.3 
 Who Was Quoted A Higher Loan Amount or House Price?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 23.1 21.2 0.84 26.9 23.1 Maximum house price 30.0 20.0 0.34 31.0 31.0 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $210,590 $211,484 0.75 $236,837 $242,16Maximum house price $226,045 $225,609 0.42 $260,721 $255,31

Who Was Quoted A Higher Loan Amount or House Price?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Maximum loan amount 47.4 24.6 0.04** 41.2 23.5 Maximum house price 52.6 17.5 0.01** 41.2 23.5 

Average Amounts White Minority Significance Test White Minority 

Maximum loan amount $215,740 $198,152 0.08** $265,255 $253,18Maximum house price $225,995 $211,871 0.01** $272,671 $265,34
 Who Learned About More Products?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 44.4 22.2 0.04** 44.8 27.6 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.81 2.48 0.07** 2.76 2.38 

Who Learned About More Products?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Number of products 55.2 29.3 0.03** 42.1 42.1 

Average Amounts White Minority Significance Test White Minority 

Number of products 2.95 2.34 0.04** 2.79 2.58 
Who Received More Coaching?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 54.9 22.5 0.001** 45.2 19.0 

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.51 0.90 0.01** 1.21 0.86 

Who Received More Coaching?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Positive Coaching 40.7 24.7 0.07** 35.3 47.1 

Average Amounts White Minority Significance Test White Minority 

Positive Coaching 1.15 0.84 0.10** 0.85 1.09 
 Who Received More Follow-Up?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 7.0 4.2 0.73 11.9 0 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.10 0.04 0.73 0.14 0.02 

Who Received More Follow-Up?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White

Favored

% Minority

Favored

Significance

Test

% WhiteFavored

% Minori

Favored

Follow-Up Contact 3.7 19.8 0.01** 5.9 5.9 

Average Amounts White Minority Significance Test White Minority 

Follow-Up Contact 0.14 0.44 0.01** 0.12 0.09 
Who Was Encouraged to Consider FHA?

Black/White Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 2.9 17.1 0.13 11.8 29.4 FHA discouraged 14.3 5.7 0.45 11.8 5.9 

Who Was Encouraged to Consider FHA?

Hispanic/Anglo Tests

Both Sites: Met with White Loan Officer Both Sites: Met with Min

Treatment Indicators % White Higher % Minority

Higher

Significance

Test

% White Higher % Minori

Higher

FHA encouraged 10.3 20.5 0.39 11.1 22.2 FHA discouraged 2.6 2.6 1.00 0 0