Statement by Richard F. Syron, President, Federal Reserve Bank of Boston, before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 24, 1993 - Statements to Congress - Transcript

Federal Reserve Bulletin, April, 1993

Finally, I would like to emphasize that although lending discretion may permit discrimination to occur, removing the discretionary element would be a major mistake. If current guidelines were to become rules to be applied with no exceptions, then even if these rules were not as tight as the guidelines are today, many creditworthy applicants would be denied loans and, thus, the opportunity to own a home. And if the Boston experience is representative of that nationally, black and Hispanic applicants would fare worse than white applicants because they have higher obligation and loan-to-value ratios and weaker credit histories.

In conclusion, the Federal Reserve Bank of Boston's study of mortgage lending patterns in the Boston metropolitan statistical area shows that the large disparities in denial rates revealed by the HMDA date are partially attributable have the fact that black and Hispanic applicants have greater debt burdens, higher loan-too-value ratios, weaker credit histories, and other economic characteristics that lenders view with disfavor. However, even after having taken account of all these factors, a statistically significant and economically important gap remains in denial rates for white and minority applicants. Eliminating this gap requires that regulators, lenders, and community groups understand the nature and likely causes of that gap, stop arguing about whether a problem exists, and work more effectively together for the future.