What is the Impact of Machine Learning on Mortgage Lending?

WRDS Awards WFA Best Paper Prize for Research

Philadelphia, PA — BusinessWireWharton Research Data Services (WRDS), the leading data research platform and business intelligence tool for corporate, academic and government institutions worldwide, is pleased to announce Andreas Fuster of the Swiss National Bank; Paul Goldsmith-Pinkham of the Yale School of Management; Tarun Ramadorai of Imperial College Business School and CEPR; and Ansgar Walther of Imperial College Business School as winners of the WRDS Best Paper Award. The award was presented during the Western Finance Association conference.

Their paper, Predictably Unequal? The Effects of Machine Learning on Credit Markets examines the extent to which machine learning will harm or benefit access to mortgage credit among specific racial and ethnic groups. Their research finds that Black and Hispanic borrowers are likely to be disproportionately impacted by the use of machine learning in credit decisions.

To conduct their research the authors used a merged data set available through the Federal Reserve comprised of data from the Home Mortgage Disclosure Act and McDash mortgage servicing, licensed by Black Knight. Combined, the data offer information on mortgage loans, default outcomes and demographic information.

Key points:

  • Examining data on over 9 million home mortgages between 2009 and 2013, the authors study the efficiency in predicting default rates in the data vs. differential impacts of predictive models on different groups.
  • The paper suggests that with new technological changes across lending there will be groups who will benefit and others who won’t.
  • Legislators and policy makers who work in lending space will need to pay attention to algorithmic fairness.

“WRDS is excited to honor Professors Fuster, Goldsmith-Pinkham, Ramadorai and Walther with this Best Paper Award,” said Robert Zarazowski, Managing Director of WRDS. “As machine learning advances, it is critically important to understand its real-world impact and this paper does a tremendous job of highlighting potential unequal effects across borrowers. I congratulate the researchers for their important work.”

“We are deeply honored to receive this Best Paper Award from WRDS,” said Paul Goldsmith-Pinkham. “It is an honor to be recognized for our work and to be able to share it with the WRDS-SSRN community.”

The paper received coverage in The Economist.

A part of the Wharton School of the University of Pennsylvania, WRDS provides global corporations, universities and regulatory agencies the thought leadership, data access and insights needed to enable impactful research.

As part of its commitment to supporting exceptional research, WRDS and SSRN launched a groundbreaking collaboration to elevate the visibility of universities and researchers. The WRDS Research Paper Series is a searchable repository of all papers submitted to SSRN that cite WRDS in their work, which will increase researcher visibility and build a specialized research base that will advance shared knowledge. In addition, the organizations have launched the WRDS-SSRN Innovation Award™ to honor emerging business schools in North America, Asia-Pacific, and EMEA. Learn more about how WRDS is driving impact >>

About WRDS
Wharton Research Data Services (WRDS) provides the leading business intelligence, data analytics, and research platform to global institutions ̶ enabling comprehensive thought leadership, historical analysis, and insight into the latest innovations in academic research.

WRDS provides researchers with one location to access over 350 terabytes of data across multiple disciplines including Accounting, Banking, Economics, ESG, Finance, Healthcare, Insurance, Marketing, and Statistics. Flexible data delivery options include a powerful web query method that reduces research time, the WRDS Cloud for executing research and strategy development, and the WRDS client server using PCSAS, Matlab, R and more. Our rigorous data review and validation give users the confidence to tailor research and create a wide range of reliable data models. WRDS unique array of Services offer access to a suite of analytics developed by our doctoral-level research team, tutorials, research support, and Classroom by WRDS -- a teaching and learning toolkit designed to introduce business concepts in the classroom.

WRDS is a leader in impactful research. Through a partnership with SSRN, WRDS is elevating the visibility of universities and researchers working across an array of fields. The WRDS Research Paper Series is a searchable repository of all papers submitted to SSRN that cite WRDS in their work. In addition, the two organizations have launched the WRDS-SSRN Innovation Award™ to honor emerging business schools in North America, Asia-Pacific, and EMEA.

An award-winning data research platform for 50,000+ commercial, academic, and government users in 35+ countries, WRDS is the global gold standard in data management, innovative tools, analytics, and research services ̶ all backed by the credibility and leadership of the Wharton School.

About the Wharton School
Founded in 1881 as the world’s first collegiate business school, the Wharton School of the University of Pennsylvania is shaping the future of business by incubating ideas, driving insights, and creating leaders who change the world. With a faculty of more than 235 renowned professors, Wharton has 5,000 undergraduate, MBA, executive MBA, and doctoral students. Each year 18,000 professionals from around the world advance their careers through Wharton Executive Education’s individual, company-customized, and online programs. More than 98,000 Wharton alumni form a powerful global network of leaders who transform business every day. For more information, visit www.wharton.upenn.edu.

Robin Nussbaum Gold
Director of Marketing, Wharton Research Data Services