Three years ago, the Federal Reserve Bank of Boston released an examination of racial patterns in mortgage denial rates in the Boston area. The study was motivated by newly available data on mortgage applications, showing that black and Hispanic applicants were two to three times as likely to be turned down for mortgages as white applicants. The study gathered all the variables thought to be missing from the HMDA analysis, such as the applicants' debt burdens and credit histories, to see whether these economic factors explained the racial difference in denial rates. Although the additional information did explain much of the difference, after taking account of economic factors the applicant's race still significantly affected the probability of getting a mortgage.

The study has been influential and has caused many institutions to review their lending practices and supervisory agencies to alter their examination procedures. The study has also drawn criticism, with critics claiming that variables have been omitted, the model misspecified, errors made in the data, and information about racial differences in foreclosures ignored. This article provides a detailed rebuttal to these criticisms and shows that even after incorporating the concerns of some of the study's strongest critics, applicants' race as well as economic characteristics affected the probability of getting a mortgage in 1990.