Law Commons^™

"On The Take": The Black Box Of Credit Scoring And Mortgage Discrimination, Cassandra Jones Havard

All Faculty Scholarship

Subprime credit, a relatively new method of risk-based pricing, has been hailed as a way to open up markets and provide access to credit to those who would otherwise be excluded. Evidence suggests that subprime mortgage segmentation increases rather than reduces exclusionary practices in lending. Furthermore, what is unclear is how lenders determine who qualifies as a subprime borrower. This concern became manifested when studies demonstrated that minority borrowers, regardless of creditworthiness, are more likely to receive expensive, sub-prime loans. The disparity is properly attributed to lenders’ credit pricing policies which included discretionary increases despite the objectively-determined risk-based interest rate …