In a national class action, plaintiffs alleged that use of credit scores to price homeowners insurance had a disparate impact against minorities. Welch Consulting was retained by the defendant to provide statistical support for the business justification portion of the defense. In our review of the claims history of policies in five metropolitan areas, we found a strong and statistically significant correlation between the credit score and claim activity. This relationship, which took other factors used in pricing and underwriting into account, was observed for every type of coverage in each of the metropolitan areas studied.  

Welch Consulting was retained by counsel for a suburban county when a local fair housing group alleged that municipalities in that county were not “affirmatively promoting fair housing,” as required of recipients of Community Development Block Grants. The plaintiffs cited residential segregation in the county as evidence of discrimination. Welch economists challenged the index used to measure segregation and produced studies showing that choice, preferences, and wealth explained the distribution of families across neighborhoods.

Welch Consulting was retained by counsel for an insurance company to address allegations of redlining by a fair housing group, which charged that the company’s eligibility criteria disproportionately restricted the availability of full replacement cost homeowners coverage in minority neighborhoods. Our economists showed that the distribution of replacement cost policies was actually higher in minority neighborhoods than white neighborhoods. He also pointed out that in the absence of the restrictions the company would be vulnerable to elevated losses arising from moral hazard and adverse selection.  In the order granting summary judgment the judge cited the economists' discussion of moral hazard.

Welch Consulting was retained by attorneys for a national insurance company to address a fair housing group's allegations of disparate impact and redlining. The plaintiff alleged that certain guidelines reduced the numbers and quality of policies sold in minority neighborhoods in five metropolitan areas. Our studies found that removal of these guidelines did not result in significant changes in the types of policies purchased in minority neighborhoods. We also showed that there was not a consistent pattern in the disparities between white and minority neighborhoods that was common to all five metropolitan areas.  

The US Department of Housing and Urban Development (HUD) retained Welch Consulting economists to conduct studies on the government sponsored enterprises (GSEs) that support the residential mortgage market. Our economists contributed to reports on the Federal Home Loan Bank System and on Freddie Mac and Fannie Mae. These reports were published by HUD in 1994 and 1996, respectively.    

Beginning in the late 1990s, Welch Consulting was retained to conduct a series of analyses for a government sponsored enterprise. In one study, Welch economists analyzed how HUD defines “underserved areas” in its goals for lending to minority and low-income borrowers by GSEs. In another, Welch economists used Home Mortgage Disclosure Data (HMDA) and Census data to analyze the effect of increased lending goals for underserved areas set by HUD. Another report, which was coauthored by former OMB Director James C. Miller, III and was distributed to congressional staff and the financial media, assessed the relative costs and benefits of federal sponsorship of the GSEs.