Harold A. Black

Do Black-Owned Banks Discriminate Against Black Borrowers?

Black-owned and white-owned banks are studied to test for lending discrimination based on applicants race. Using single-equation models the rndings suggest that black-owned banks may utilize applicant race in the mortgage granting decision. The result holds in a naive HMDA model and in an enhanced HMDA model with bank-specirc, demographic, and neighborhood characteristics added.

Is There Discrimination in Mortgage Pricing? The Case of Overages

We conduct an empirical investigation to explain observed differentials in mortgage overage pricing. Our analysis makes several contributions. First, we study an area of mortgage pricing that is little understood by consumers and has received little scrutiny in the literature. Second, we consider the impact of the market power of individual loan officers on overages paid by borrowers, particularly minorities. Third, we include a number of borrower and lender characteristics not available in previous analysis. Importantly, we introduce a new direct measure of the market power of individual loan officers. We also incorporate the interactive effects of loan officer market power and the race of the borrower in determining the rate of the mortgage loan. Through the use of these new variables and employing proprietary data from different branches of a nationwide mortgage lending institution, we conclude that the market power of the lender and the bargaining or negotiating ability of the borrower are important determinants of overages. We find that overages paid by minorities who purchase homes are larger than those paid by whites. Our evidence suggests that this is due to differences in the pools of borrowers rather than to racial discrimination. Indeed, tests show that the pool of refinancings is more homogeneous across races than the pool for purchases, and we find no differences by race for refinancings. We conclude that a more effective way to eliminate racial differences in overages is to pursue policies designed to increase the ability of minorities to bargain more effectively rather than to enact additional antidiscrimination laws.

Black financial institutions and urban revitalization

The role of financial institutions in the processes of urban revitalization and economic development can be addressed from two perspectives. The first involves discussion of the institution operating within the urban environment. The second considers the role of the government on the local, state, and federal levels in encouraging financial institutions to actively participate in urban redevelopment financing. The purpose of this paper is to consider the role of minority institutions, majority institutions, and the government in the area of urban revitalization.

Is Race an Important Factor in Bank-Customer Preferences? The Case of Mortgage Lending

This paper tests whether there is a preference by borrowers and lenders of a particular ethnic or racial group that may predispose them to borrow and lend from each other. Using a narrow geographic area called zip code clusters, this paper groups minority-owned and non-minority-owned banks to allow for a homogenous applicant pool from which both borrower and lender preferences can be determined. This study compares Asian-owned, black-owned and Hispanic-owned banks versus white-owned banks that are located in the same zip code and adjacent zip codes. The results show that borrowing preferences exist between all applicant groups and banks from the same racial classification. In addition, some cross-racial borrowing preferences exist. The results show that across sample lending preferences exist for both black and white applicants with black-owned banks and white applicants with white-owned banks that are located in the same area as Asian-owned banks. Also, the results of the within sample lending preference model shows that white-owned banks have a preference for white applicants, at the expense of Hispanic applicants and both white-owned and Asian-owned banks exhibit a preference for Asian applicants.

Comparing lending decisions of minority-owned and White-owned banks: Is there discrimination in mortgage lending?

Abstract A recent paper by Black, Collins and Cyree [J. Financ. Serv. Res. 11 (1997) 189.] attempted to determine if Black-owned banks discriminated against Black applicants for mortgage credit. They concluded that Black applicants were more likely to be rejected than White applicants when applying for mortgage credit at a Black-owned bank. However, the use of the Metropolitan Statistical Area (MSA) as the geographic delineation from which minority-owned and non-minority-owned banks are compared may not provide a narrowly defined market from which an accurate comparison can be made. Here, the zip code cluster technique developed by Clair [Econ. Rev. (1988) 11.] is used to control for differences in applicant base that may result when using a broader geographic definition such as an MSA. The results reported in this study show that contrary to the results of Black, Collins and Cyree, Black-owned banks are not statistically more likely to reject Black applicants. The study also considers Asian-owned and Hispanic-owned banks. The results show that Asian-owned banks are equally as likely to provide a mortgage to Asian applicants, while Hispanic applicants are more likely to receive a mortgage from a Hispanic-owned bank.

The effect of common bond on credit union performance: The case of black-controlled credit unions

This article compares the financial characteristics of black-controlled credit unions by type of common bond. The study found that many of the operational differences of these credit unions can be attributed to institutional characteristics associated with the three distinct types of credit unions. It also found that black credit unions are viable financial institutions, regardless of type of common bond. This finding is linked to the ownership of credit unions by its membership. This unique relationship has implications for black economic development.

An Analysis of Market Segmentation in Mortgage Lending Between a Commercial Bank and a Mutual Savings Bank

This paper is concerned with determining whether commercial banks and mutual savings banks serve separable clienteles in the mortgage market. In order to test the hypothesis, determinants of mortgage lending terms at a major commercial bank and a large mutual savings bank were analyzed. The results indicate that market segmentation does exist. However, some variable signs were other than anticipated. Nevertheless, the significance level of the summary statistic shows that the overall population was separable for the two institutions. Thus, the results of this paper are preliminary. To draw general conclusions, additional data from a larger sample must be obtained. Copyright American Real Estate and Urban Economics Association.

Do lenders discriminate against low-income borrowers?

Summary and ConclusionThe purpose of this paper is determine whether the use of a narrow geographic definitions of the market served by banks results in conclusions that are different from those found if a broader geographic definitions is used. Using ZIP code clusters for a sample of low-income applicants, we find results that are different from those when the traditional MSA sampling technique is used.

External audits and the impact of loss of reputation on agency costs: an empirical investigation

Refers to previous research on the effects of poor external audits on agency costs to shareholders and takes the 1991 disciplinary action by the US Securities and Exchange Commission against Ernst and Young (re the Republic Bank) as an example to examine the effect on its other audit clients and on financial institutions. Uses event study methods to show that there were no statistically abnormal returns for financial institutions or for Ernst and Young’s audit clients; but significant negative returns for firms audited by non‐big six auditors.

Supervision and Cost Efficiency in Banking

This paper suggests a link between bank operating efficiency and federal supervisor. Since supervisory priorities can vary by the context in which the supervisor was conceived, resulting differences in supervisory policies and procedures may underlay differences in the operating efficiency of their supervised banks. The effect on bank operating expenses is estimated at the individual bank level for each of four size strata using a translog cost function, controlling for bank characteristics and the impact of scale and scope economies. Results generally support a conclusion that bank operating cost differences exist by supervisor, except in the largest size stratum.