Enforcing Fair Lending: Evidence from Mortgage Market Litigation

February 2026

Enforcing Fair Lending: Evidence from Mortgage Market Litigation

Matthew Maury, Michael Suher, and Jeffery Y. Zhang

Abstract:

Does fair lending litigation impact mortgage lender decisions? Using a novel dataset of all fair lending legal actions from 1991 to 2023, we find that it does. In the wake of legal settlements for discrimination against Black borrowers, lenders significantly reduced denial rates for Black applicants. The reductions offset pre-litigation racial disparities in denial rates by litigated banks, relative to those banks' competitors. Origination rates for Black applicants also increased post-litigation. We further observe evidence of a spillover effect on the approval decisions of non-litigated banks operating in the same city as a litigated bank. Altogether, the evidence suggests that the enforcement of fair lending laws is an effective tool to reduce racial discrimination in credit markets.

Keywords: Fair lending, Mortgages, Credit

DOI: https://doi.org/10.17016/FEDS.2026.012

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