Dear Hilary – Determining Race in Fair Lending
October 2016

Dear Hilary,

I am trying to understand the Fair Lending reports. Can you clarify for me how exactly Visible Equity is able to determine the race of a borrower?


Fair Lending


Dear Fair Lending,

The purpose of the Fair Lending product is to look for and identify potential disparate impact along loans, testing by age or race/ethnicity. The model segments the portfolio by race and ethnicity by the data you send us. In other words, when you send over your data, we look at both the last name and address of the borrower; our expected race calculation influenced by both (1) the racial distribution of a given last name, ( 2) as well as a given census tract.

  1. To calculate the expected race for a borrower by the last name, we use the Demographic Aspects of Surnames from Census 2000 index of names and the probability of race associated with each last name. The report was undertaken to provide a better understanding of the overall distribution of surnames in the population, and to provide some idea of the relationship between surnames and basic demographic characteristics such as gender, race and ethnicity. The data for this project were taken from records from the 2000 decennial census of population.
  2. To calculate the expected race for a borrower by the area they reside in, we use the 2012 Census Summary File 1, Census Bureau to look at the racial composition by the census block.Summary File 1 of the 2010 Census contains the data compiled from the questions asked of all people and about every housing unit. Population items include sex, age, race, Hispanic or Latino origin, household relationship, household type, household size, family type, family size, and group quarters.

If you have any questions, never hesitate to ask.

Happy Friday!



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