MReport August 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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M REPORT | 49 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Report: African American Mortgage Applicants Lag Behind in Approvals There is a stark contrast to the 7% denial rate for white buyers. A ccording to a Redfin report that sourced information from the Home Mortgage Disclo- sure Act of the Consumer Financial Protection Bureau (CFPB), 15.9% of African Americans are denied loans when applying for mortgages. This represents 1 in 6 Black mort- gage applicants being denied for a home loan. In comparison, only 7% of white applicants are denied when applying for home loans. The Redfin report reveals that this schism in denials based upon the criteria of race only widens as one reaches the most segregated regions of the U.S. Specifically, the widest gaps between white and Black mortgage approvals exist in Milwaukee, San Francisco, Detroit, Chicago, and St. Louis. Within these metros, data shows that denial rates for Black applicants are 10% greater than their white counterparts. Prospective African American buyers in Milwaukee and San Francisco are shown to be more than three times more likely to be denied when applying for a home mortgage loan. Although banks in these areas especially are often cited as contributing these denials to debt and credit history alone, these two factors are more likely to be roadblocks for Black mortgage ap- plicants due to decades of wealth inequality. Arnell Brady, a Redfin Mortgage Adviser in both Milwaukee and Chicago, com- mented on this schism in the housing industry: "The residue of redlining is still very tangible in Milwaukee and Chicago. Segregation continues to perpetu- ate the uneven playing field for Black communities, which are se- verely underserved when it comes to financial education and access to credit. Buying a home isn't like walking into a bank and getting a credit card. Everyone wants a piece of the American Dream, but that's hard to achieve when you don't have access to the right tools and information." Elizabeth Korver-Glenn, an as- sistant professor at the University of New Mexico, suggests that a simple solution could be hiding applicant names and races/ethnici- ties from underwriters when they are determining risk. Another course of action could be provid- ing lending institutions with bias training and incentivizing mortgage brokers to lend money to people of color and low-income Americans to even the playing field.

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