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Past studies on discrimination in home mortgage lending have focused on the loan approval process, yet results show that most of the variation in minority lending across banks is due to the variation in the volume of minority applications and not the variation in the minority approval rate. This paper focuses instead on the application stage and the impact of branch locations on minority applications and lending. The presence of branches in minority areas significantly increases a bank's volume of minority applications and hence its minority lending; however, branch locations do not appear to affect the minority approval rate. These finding refute the argument that banks take in deposits but do not lend in minority areas, and the view that technological innovations such as telephone banking have made branches obsolete. They suggest that the current policy of emphasizing branches in minority areas may be effective in increasing minority lending at individual banks, but not necessarily the overall lending in a minority area.
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