Journal of Finance (2023)
Authors: W. Scott Frame, Ruidi Huang, Erica Jiang, Yeonjoon Lee, Will Liu, Erik Mayer, and Adi Sunderam
Abstract: We study links between the labor market for loan officers and access to mortgage credit. Using novel data matching the (near) universe of mortgage applications to loan officers, we find that minorities are underrepresented among loan officers. Minority borrowers are less likely to complete mortgage applications, have completed applications approved, and to ultimately take-up a loan. These disparities are reduced when minority borrowers work with minority loan officers. Minority borrowers working with minority loan officers also have lower default rates suggesting that minority loan officers have an informational advantage with these borrowers. Our results suggest that minority underrepresentation among loan officers reduces minority borrowers’ access to credit.