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M R EP O RT | 45 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 ORIGINATION Study Shows Black Homebuyers Paying More Not everyone is able to take advantage of record-low mortgage rates. A new study reveals why Black borrowers are more likely to have higher-rate loans. M ortgage rates have hovered around record lows recently, a condition that usually results in smaller monthly payments and greater savings. However, not all consumers can take advantage of low rates. Depending on factors including income, employment history, and credit score, the rates that some borrowers receive may be signifi- cantly higher than the record lows that continuously are reported. Black homebuyers, for example, are more likely to be saddled with higher rates than other homebuy- ers, a new report revealed. To demonstrate how the rates offered to Black homebuyers are often higher than rates offered to homebuyers of other races and ethnicities, LendingTree used data from the Home Mortgage Disclosure Act (HMDA) to look at the share of Black homebuyers and owners who received "high- cost" mortgage purchase and refinance loans in 2019. A "high-cost mortgage" refers to home loans with an APR higher than the benchmark Average Prime Offer Rate (APOR), as defined by the Federal Financial Institutions Examination Council (FFIEC). "In analyzing these high-cost loans," LendingTree reports, "we found that Black borrowers are much more likely to receive high-cost loans than the overall population in many of the na- tion's largest metros." LendingTree charted the findings, which include informa- tion by city and highlighted the following survey revelations: • In all 50 of the metros looked at in LendingTree's study, Black homebuyers are more likely to receive high-cost purchase loans than the overall population. The average spread between the overall share of high-cost mortgage loans and the share of high-priced mortgage loans for Black buyers is 8.99%. • Cleveland, Detroit, and Milwaukee are the metros with the widest spread between the overall share of high-cost mortgage loans and the share of high-cost mortgage loans taken out by Black homeowners. Meanwhile, San Antonio, San Diego, and San Jose, California are the metros with the smallest gap. The average spread in the metros with the widest gap is 16.4%, compared with only 1.6% in metros where the gap is narrowest. • For mortgage refinances, high- priced loans are less common, but they still exist. In Kansas City, Missouri, Phoenix, and Denver, the spread between the overall share of high-cost refinance loans and the share of high-cost refinances loans taken out by Black homeowners is the widest. In these three metros, the average spread is 4.8%, which suggests that both Black and non-Black homeowners are unlikely to take out a high-cost refinance loan. • Surprisingly, there are 2 metros where Black homeowners are less likely to receive a high- cost refinance: Chicago and Detroit. In Detroit, the share of Black homeowners who take out high-cost refinance loans is 0.05% lower than that of the overall population. In Chicago, they are 0.41% less likely. • On the county level, the disparity between the share of Black homebuyers and refinance borrowers and the share of the overall population who receive high-priced loans can be extreme. In some counties, 100% of Black borrowers receive both high-cost purchase or refinance loans, even if those counties have relatively large Black populations. As a result, spreads in some counties are more than 90%. However, there are some counties where Black borrowers are less likely to receive a high-cost loan than the overall population.