5 ms·

The Secret Bias Hidden in Mortgage-Approval Algorithms

7 points by atg_abhishek 5y ago

spoonjim 5y ago
What are the default rates by race?
- MyHypatia 5y ago
  I don't think default rates by race should impact an individual's mortgage approval or rates. A responsible individual shouldn't be punished with less favorable loan terms because of their race. Why should they have to work harder as an individual to prove their credit-worthiness because they were born a certain race? That completely goes against the idea that hard-work and individual responsibility matter.
  - spoonjim 5y ago
    But the algorithm will find any correlations it can. If it is banned from using race it will amplify the weights on things that it can correlate.
- TheCoelacanth 5y ago
  Doesn't matter. Discriminating based on race is illegal for mortgage lenders because of the Fair Housing Act.
tetromino_ 5y ago
From the article: > She was told she didn’t qualify because she was a contractor, not a full-time employee—even though her boss told the lender she was not at risk of losing her job. Her co-workers were contractors, too, and they had mortgages. The most important difference between Crystal Marie and her coworkers is not skin color but the fact that, as the article says a couple of paragraphs earlier, she "had moved to this Southern town from pricey Los Angeles a few years ago". Based on my experience in applying for mortgages, if you have a contractor position, lenders will treat you as a high-risk client unless you have been working at the same job for at least 3-4 years. And according to what I've been told, the lenders don't have a choice in this matter: it's due to a federal regulation enacted after the 2008 crisis.
- deleted 5y ago
  [deleted]
- klyrs 5y ago
  So if the problem wasn't that she was a contractor, why was she told that it was the problem? But anyway, that's just an anecdote; the article has several sources with lots of data. Do you have a just-so explanation for the why denial rate by credit score varies so much by race/ethnicity?
  - tetromino_ 5y ago
    Please read the article more carefully. The article's authors compared denial rate for black and white applicants by debt-to-income ratio and loan-to-value ratio. The article's authors did not (and could not, because they didn't have the data) compare denial rate by credit score. Credit scores, like every single measure of wealth and socioeconomic stability in the US, are of course correlated with race. > As for credit scores, it was impossible for us to include them in our analysis because the CFPB strips them from public view from HMDA data—in part due to the mortgage industry’s lobbying to remove them, citing borrower privacy.

7 points by atg_abhishek 5y ago

spoonjim 5y ago

What are the default rates by race?

MyHypatia 5y ago
I don't think default rates by race should impact an individual's mortgage approval or rates. A responsible individual shouldn't be punished with less favorable loan terms because of their race. Why should they have to work harder as an individual to prove their credit-worthiness because they were born a certain race? That completely goes against the idea that hard-work and individual responsibility matter.
- spoonjim 5y ago
  But the algorithm will find any correlations it can. If it is banned from using race it will amplify the weights on things that it can correlate.
TheCoelacanth 5y ago
Doesn't matter. Discriminating based on race is illegal for mortgage lenders because of the Fair Housing Act.

tetromino_ 5y ago

From the article: > She was told she didn’t qualify because she was a contractor, not a full-time employee—even though her boss told the lender she was not at risk of losing her job. Her co-workers were contractors, too, and they had mortgages. The most important difference between Crystal Marie and her coworkers is not skin color but the fact that, as the article says a couple of paragraphs earlier, she "had moved to this Southern town from pricey Los Angeles a few years ago". Based on my experience in applying for mortgages, if you have a contractor position, lenders will treat you as a high-risk client unless you have been working at the same job for at least 3-4 years. And according to what I've been told, the lenders don't have a choice in this matter: it's due to a federal regulation enacted after the 2008 crisis.

deleted 5y ago
[deleted]
klyrs 5y ago
So if the problem wasn't that she was a contractor, why was she told that it was the problem? But anyway, that's just an anecdote; the article has several sources with lots of data. Do you have a just-so explanation for the why denial rate by credit score varies so much by race/ethnicity?
- tetromino_ 5y ago
  Please read the article more carefully. The article's authors compared denial rate for black and white applicants by debt-to-income ratio and loan-to-value ratio. The article's authors did not (and could not, because they didn't have the data) compare denial rate by credit score. Credit scores, like every single measure of wealth and socioeconomic stability in the US, are of course correlated with race. > As for credit scores, it was impossible for us to include them in our analysis because the CFPB strips them from public view from HMDA data—in part due to the mortgage industry’s lobbying to remove them, citing borrower privacy.