BAYBANK BOSTON I.

FACTS OF THE CASE There is a trend of racial discrimination in the acceptance of mortgage lending applicants as cited in the headline of Boston Globe. The headline stated that inequities were cited in mortgages and that the preliminary finding is Racial Bias. A recent study, however, showed the opposite. It was stated in the recent study that applicants who met the credit criteria on the first cut were given loans without regard to race. Hence, the belief or trend stated above is disproved. However, it was found out further in the study that racial differences were found in the discretionary process of working the application even after all credit factors were taken into consideration.

II.

POINT OF VIEW Mr. Richard Pollard, Chairman of BayBank Boston

III.

PROBLEM What should Mr. Richard Pollard do or implement in order to provide equal access to BayBanks banking services and resources?

IV.

OBJECTIVE To provide equal access to BayBanks banking services and resources in order to survive the fierce competition currently happening in the banking industry.

V.

AREAS OF CONSIDERATION A recent study conducted by the Boston Federal Reserve Bank found that there is a racial bias in the discretionary process of working the mortgage applications even after all the credit factors were taken into consideration. The Home Mortgage Disclosure Act (HMDA) acquired statistical data that shows that racial bias exists considering that there is higher denial rates for Black and Hispanic applicants as opposed to White applicants. A study on the data acquired by the HMDA shows that the denial rates for Black and Hispanic applicants are still higher even if the said applicants were treated as if they have white obligation ratios, loan-to-value ratios, credit histories, and other characteristics. A conclusion was formed that even if the aforementioned races had all the economic and property characteristics of whites, the said races would still have experienced a higher denial rate.

VI.

ALTERNATIVE COURSES OF ACTION 1. Modify the process on how mortgage lending applications are approved. Advantage(s): a. Modifying the process to a lenient but controlled level can loosen the tight rope of racial bias. b. Applicants who were previously denied have the possibility of getting their application approved. c. An increase in mortgage applications may be experienced by the bank. This will help the banks to reach their needed the additional volume in mortgage applications. Disadvantage(s): a. Modifying the approval process can take a long time to implement. Many factors are supposed to be taken in consideration. b. Some applicants who underwent the old process and were subsequently approved may pose their dissent. 2. Formulate additional services that could be availed by those applicants who were denied of availing the services, specifically mortgage lending services, of the bank. Advantage(s): a. The additional services offered by the bank may cater to more applicants or clients. b. The additional services may serve as a Plan B for those applicants who were denied of their mortgage application. c. This may help the bank to cater to a wider group of individuals thus increasing the market of the bank. Disadvantage(s): a. Creating additional services could put a stress on the banks operations as they are to monitor such additional services without the benefit of hiring additional manpower.

VII.

CONCLUSION AND RECOMMENDATION It cant be denied that there is racial bias in the approval of home mortgage lending applications as stated in the study conducted by the Boston Federal Reserve Bank and the data acquired by the Home Mortgage Disclosure Act (HMDA). The data acquired by the HMDA shows that the Blacks and the Hispanics will still get a higher denial rate even if they have white obligation ratios, loan-to-value ratios, credit histories, and other characteristics. Hence, it is perceived that racial bias is one that which always exists even if the factors are altered to the benefit of the aforementioned races. To mitigate the said disparity, additional services that can be availed by the said applicants who were denied of their desired services should be offered. In view of the foregoing, the group recommends the second alternative course of action which is for BayBank Boston to formulate additional services that could be availed by the applicants.