MORTGAGE LOANS TO NONOCCUPANTS AS AN INDICATOR OF RACIAL REDLINING

Where racial redlining prevents potential residents of a neighborhood from obtaining mortgage loans, a greater number of houses will he sold to investors and a greter number of residents will rent homes owned b y such investors. It may be possible, therefore, to measure the extent of redlining by using HMDA data on loans made to nonoccupants. This s tudy models the flow of mortgage credit to nonoccupants in nine MSAs, using traditional economic and demographic variables and variables des cribing the racial composition of the neighborhood. The percentage of the census tract population that is black has a small but statisticall y significant coefficient in Los Angeles, Chicago, and Nashville, and the Hispanic population variable is statistically significant in Los A ngeles, Chicago, Boston, and Albuquerque. The model explains a high pe rcentage of the variation in mortgage lending to nonoccupants across c ensus tracts and is robust with respect to alternative formulations of the dependent variable, and the independent variables have the hypoth esized signs.