Mortgage Discrimination Case against a Lending Institution

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In a high-profile class action case involving a leading financial institution, a federal circuit court affirmed a lower court’s order denying class certification.

Counsel for a prominent financial institution retained Cornerstone Research and Christopher James of the University of Florida to assess whether the defendant had discriminated against minority borrowers in its mortgage lending practices. The plaintiffs argued that the defendant had a pricing policy for its loans that resulted in higher costs for a purported class of borrowers.

Professor James presented economic evidence showing flaws in the plaintiffs’ regression analysis.

Professor James conducted statistical analyses using individual-level data, which showed that borrowing and lending are multidimensional processes involving many different loan products, features, and price terms. The study demonstrated that the lending process requires considering both the quantitative and qualitative characteristics of borrowers.

In addition, Professor James presented economic evidence showing flaws in the plaintiffs’ regression analysis. The report illustrated that the plaintiffs’ model omitted key explanatory variables, which produced biased results. A proper statistical accounting of the quantitative and qualitative characteristics of borrowers demonstrated there was no discrimination against minority borrowers.

A federal circuit court affirmed a lower court’s order denying certification of the proposed class.


For additional information about this case, please contact Samid Hussain or Michael Topper.

Case Expert

Christopher M. James

William H. Dial/SunBank Eminent Scholar in Finance and Economics,
Warrington College of Business Administration,
University of Florida;
Senior Advisor, Cornerstone Research