ABSTRACT
This chapter presents the results of a study which examined the role of the Federal Housing Administration (FHA) single-family insurance program in the provision of credit to minority borrowers and in predominantly minority neighborhoods. It examines variations in the relative importance of FHA by location, lender type, and the race and income of both the borrower and the neighborhood. The chapter examines loan acceptance rates by each of these factors, and compares the experience of borrowers applying for both conventional and FHA loans. It attempts to control for differences in loan default risk by specifying a loan default model that is used to predict the probability of default for each loan used in the analysis. The chapter utilizes this analysis of loan defaults to examine the extent to which observed racial and ethnic differences in loan choice and loan acceptance rates continue to hold after controlling for differences in the characteristics of the borrower, the loan, and the neighborhood.
