Lender Heterogeneity in Home Mortgage Lending Evidence from Hmda Data in Context of the Covid-19 Pandemic

Studies on denial rates in mortgage lending do not adequately account for lender heterogeneity due to divergent underwriting or regulatory practices. Using a sample of over two million home purchase mortgage applications from the Home Mortgage Disclosure Act (HMDA) data between 2018-2020, we examine these differences for the largest 20 lenders in the US. We perform counterfactual experiments to predict the denial rates of individual lenders if they evaluate all mortgage applications in the geographical regions they serve. Denial rates display significant dispersion ranging from 1.4% to 33%. Denial rates were 7% higher in 2020 relative to the pre-pandemic levels