Despite their limitations, the HMDA data supply a key insight into the aggregate disparities: they reflect in part a segmentation of the market by race and ethnicity. Black and Hispanic borrowers are more likely to obtain mortgage loans from institutions that tend to specialize in subprime lending.
Now, at least part of this segmentation of the market by race and ethnicity may reflect objective differences in borrowers’ preferences or differences in credit-risk indicators, such as credit scores, that are not included in the HMDA data. Yet the segmentation may have more troubling causes, at least in part.