Book review of Stephen L. Ross and John Yinger, The Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement. Cambridge, MA: MIT Press, 2003. $39.95 hardcover

Karger, Howard Jacob

English

ScholarWorks at WMU

The Journal of Sociology & Social Welfare Volume 31 Issue 3 September Article 11 September 2004 Review of The Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement. Stephen L. Ross and John Yinger. Reviewed by Howard Jacob Karger. Howard Jacob Karger University of Houston Follow this and additional works at: https://scholarworks.wmich.edu/jssw  Part of the Social Work Commons, Urban Studies Commons, and the Urban Studies and Planning Commons Recommended Citation Karger, Howard Jacob (2004) "Review of The Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement. Stephen L. Ross and John Yinger. Reviewed by Howard Jacob Karger.," The Journal of Sociology & Social Welfare: Vol. 31 : Iss. 3 , Article 11. Available at: https://scholarworks.wmich.edu/jssw/vol31/iss3/11 This Book Review is brought to you by the Western Michigan University School of Social Work. For more information, please contact wmu-scholarworks@wmich.edu. Book Reviews 171titative evidence about the extent to which poor residents havebeen displaced by the renovation of neighborhoods.The book concludes with essays that Ranney hopes will in-spire a new strategy of collective action to challenge the newworld order and create a society that will, in his opinion, provide"living wages" and "affordable housing." He claims that thelocation-specific tactics that were used to organize the lower- andworking-classes in the past-notably, those devised by activistSaul Alinsky-are no longer relevant in a world dominated bytransnational businesses; hence, an alternative form of organiza-tion is needed. On the final page, Ranney thus proposes that theideas of the Brazilian educator, Paulo Freire, could be used topromote an educational campaign to foster awareness of global-local connections among those who are adversely affected bythe expansion of competitive capitalism. This brief discussion is,unfortunately, underdeveloped, and it will dissatisfy those whoare looking for clear and specific guidelines for social activism.In sum, this book contains some informative case studies, butoverall, it contributes little in the way of unique insights or new di-rections for future research, and it will be more favorably receivedby critical neo-Marxists than by mainstream social scientists.Robert L. BoydMississippi State UniversityStephen L. Ross and John Yinger, The Color of Credit: Mortgage Dis-crimination, Research Methodology and Fair Lending Enforcement.Cambridge, MA: MIT Press, 2003. $39.95 hardcover.This book blends policy analysis and complex technical rec-ommendations relating to the mortgage lending industry. Forone, the authors comprehensively examine what has been learnedabout mortgage-lending discrimination in recent years. They re-analyze existing loan-approval and loan-performance data anddevise new tests for detecting discrimination in contemporarymortgage markets. They also review the 1996 Boston FederalReserve study, examining new evidence that the minority-whiteloan-approval disparities found represented discriminationrather than variations in underwriting standards justified on172 Journal of Sociology & Social Welfarebusiness grounds. Ross and Yinger also investigate how the cur-rent fair-lending enforcement system overlooks disparate impactdiscrimination and disparate treatment. Specifically, there aretwo primary forms of discrimination in mortgage lending: dis-parate treatment which is the obvious and unequal treatmentof applicants; and disparate-impact policies that, while equallyapplied, systematically disadvantage minorities. Lenders desir-ing to practice disparate-treatment discrimination but who areprevented from doing so may achieve virtually identical resultsby using discrimination-based characteristics other than groupmembership. One example of the latter is credit scoring or otherautomated underwriting, which can be used to discriminate whileappearing to treat all groups equally. Lastly, the authors developinnovative (but highly technical) procedures to rectify weak-nesses in the mortgage loan system.Ross and Yinger note that in 2000, the home ownership rate inthe United States was 67.4 percent-an all-time high. However,home ownership were not evenly spread across ethnic groups.The home ownership rate was 73.8% for non-Hispanic whites,47.2% for blacks, and 45.5% for Hispanics. The authors argue thatwhile this gap may have many causes, one of the likeliest is dis-crimination in mortgage lending. The authors make a convincingcase for discrimination in mortgage lending. Data collected un-der the Home Mortgage Disclosure Act (HMDA), which recordsapplicant ethnicity and the disposition of the mortgage appli-cation, shows that in 2000 black applicants were twice as likelyas white applicants to be turned down for a loan, and Hispanicapplicants were 41 percent more likely to be turned down. Whilethese disparities in loan approvals do not conclusively prove thatblacks and Hispanics face discrimination in mortgage lending(in that they do not take into account possible differences inborrower creditworthiness) the differences are so dramatic thatthey strongly imply the existence of discrimination.Ross and Yinger observe that while no one explicitly arguesfor discrimination in mortgage lending, some maintain that dis-crimination is a historical relic and no lender could survive intoday's competitive market while practicing it. The authors notethree reasons why this assumption is naive: (1) the HMDA datashows that ethnically-based loan rejection ratios have remainedBook Reviews 173constant (at about 2.0) throughout the 1990s, (2) the results of theBoston Federal Reserve Bank study found extensive evidence ofloan discrimination, and (3) strong evidence points to extensivedisparate-impact discrimination.Ross and Yinger argue that the current fair-lending en-forcement system is seriously flawed since it misses cases ofdiscrimination in loan approval that take the form of disparatetreatment and is incapable of identifying loan-approval discrim-ination which takes the form of disparate-impact. They proposethree steps for eliminating these flaws. First, fair-lending enforce-ment agencies should come up with the resources needed toascertain that they are not missing existing disparate-treatmentdiscrimination. Multivariate regressions should be employed bythese agencies to make that determination. Second, these agen-cies should conduct loan-approval regressions based on applica-tions submitted to a large sample of lenders. These regressionsshould recognize the complexity of underwriting standards andthe possibility that these standards vary systematically acrosslenders based on their loan portfolios. Third, fair-lending enforce-ment agencies should implement a performance-based analysisof loan-approval decisions to supplement the multiple regressionprocedures.All told, the authors provide an excellent summary of theavailable economic and statistical evidence for racial discrimina-tion in the mortgage industry. While comprehensive, The Color ofCredit is basically a specialized volume for a specialized audience.Although Ross and Yinger target their book at economists and thebanking industry, many managers and policymakers most willfind large sections of it difficult to read. While the policy sectionsare well-written and understandable, the full value of the critiqueand especially the technical recommendations and statistical re-search, requires a background in economics and knowledge ofstatistical procedures.While Ross and Yinger take a technical, almost laboriousapproach to the subject matter, most social workers or advocateswho work with the poor have acquired enough anecdotal evi-dence to say "So what, I already know that." Nevertheless, it isimportant for social workers and academics to understand howthe process of discrimination is manifested since in contemporary174 Journal of Sociology & Social Welfareinstitutional discrimination, the devil is almost always in thedetails. In short, although the details may be tedious they arenevertheless important since that is the ground where many ofthe future battles will be fought.Howard Jacob KargerUniversity of HoustonTiziano Vecchiato, Anthony N. Malucchio and Cinzia Canali(Eds), Evaluation in Child and Family Services: Comparative Clientand Program Perspectives. Hawthorne, NY: Aldine de Gruyter,2003. $49.95 hardcover, $24.95 papercover.Evaluation of services and programs has become an increas-ing important component of professional behavior in the socialand behavioral sciences. The training and emphasis on evaluationis fueled, in part, by professional ethics requiring practitioners todetermine that interventions they are using are effective. It is alsosupported by increased requirements of accountability by publicand private funders of services. While increasing accountabilityhas been a general trend, it is particularly important during a timeof scarce resources for social services. Practitioners and programsmust demonstrate that services are effective and, in a climate ofincreased competition for funds, that they are also efficient.This edited book by Vechhiato, Mulucchio and Canali offersa unique examination of evaluation issues from a global perspec-tive in the domain of child and family services. Chapter 1 de-scribes permanency policies and research in the United Kingdom.Drawing comparisons to polices and research in Sweden, theUnited States and Australia, it concludes that no cross-nationalcomparisons can be adequately made because of conceptual andresearch methodological differences across countries. Chapter 2offers an approach to evaluating foster care outcomes with vari-ous data approaches, drawing from studies in the United States.Chapter 3 presents preliminary results of a participatory actionresearch project with multi-problem children in Italy. Recogniz-ing that assessment is a cornerstone of good practice, Chapter4 introduces a model for assessment and a preliminary processevaluation of the model in England. Chapter 5, also based inEngland, is a descriptive study of short-term foster care from

Review of \u3cem\u3eThe Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement.\u3c/em\u3e Stephen L. Ross and John Yinger. Reviewed by Howard Jacob Karger.

https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=3011&amp;context=jssw

Review of \u3cem\u3eThe Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement.\u3c/em\u3e Stephen L. Ross and John Yinger. Reviewed by Howard Jacob Karger.

Abstract

Similar works

Full text

Available Versions

ScholarWorks at WMU