The Processing Problem

A new Federal Reserve Bank of Atlanta study adds another element to those prior research argues are evidence of widespread racial discrimination in U.S. mortgage finance.  It adds processing speed to the list of discriminatory practices that now is said to include denial disparities, pricing, and refi rates.  The paper’s findings cast particular aspersions on loans originated for the GSEs, but it does so at a time when PLS distorted the market in terms of both underwriting and processing speed.  Its conclusions that GSE practices exacerbated discrimination and that processing times added to the problem are not, in our view, clearly validated by the data, which suggest to us that processing speed is an artifact of other market factors (e.g., discriminatory steering by some lenders, GSE AU and put-back power).