Bias continues even with online mortgage lenders

It would seem that online mortgage lending would reduce discrimination against minorities, but a new study from the University of California, Berkeley, found otherwise.

The study showed that both in-person and online lenders charge black and Latino buyers higher interest rates. People of color and other minorities end up with up to half a billion dollars more in interest than white homebuyers, the study found.

The surprising thing is that it’s the technology itself that’s causing the bias. The authors of the study said that one of the main reasons for the discrimination is “algorithmic strategic pricing.” That is what they are calling lenders’ use of technology to select potential borrowers based on where they live and based on their resources to “shop around” and compare mortgages.

Essentially, though online lenders might not be intending to create a bias against minorities, using certain criteria in defining their pricing might be inadvertently targeting minorities for less favorable rates.

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