TheMReport — News and strategies for the evolving mortgage marketplace.
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18 | Th e M Rep o RT Feature As was true in 1995, home prices are rising at rates faster than household income and at a rate that outpaces inflation. This has created an affordability problem that has caused renters of all ages and genders to avoid buying homes even though mortgage loan interest rates remain low. Where Gender Makes a Difference: Mortgage Loan Approvals S tudies show that women pay more for mortgage loans than men with similar credit profiles. A study by the Pew Research Center examined subprime mort- gage lending just before the housing crash and found that women were 32 percent more likely to receive higher-cost subprime mortgages than men even though they had slightly higher credit scores than men. In addition, another recent study by research- ers Ping Cheng, Zhenguo Lin, and Yingchun Liu found that women consistently paid more for mortgage loans than men despite comparable credit scores and income. While neither study found that women are offered less favorable mortgages because they have lower income than men, there is still a gender pay gap. While estimates of the gap range from 77 to 84 percent, women overall continue to be paid less than men and they have lower lifetime earnings than men. Because they pay more to buy homes than men with comparable incomes, homeowner- ship does not provide the same wealth-build- ing benefits for women as it does for men. The good news about these studies is that there is no evidence that women were forced to pay more because of gender discrimination in the lending markets. The bad news is that both studies conclude that women pay more to buy homes because they are less finan- cially literate than men. The studies found that women do not shop around as much for the best mortgage product, are less likely to negotiate for a better interest rate, and are generally less familiar with the home buying process or the mortgage market. The conclusion that women pay more for mortgage loans because of lower levels of financial literacy is consistent with gen- eral research that has examined U.S. and global financial literacy rates. This research consistently shows that women of all ages are much less likely to correctly answer financial literacy questions than men and that women lag men in money management and investment planning skills. If women become more literate and spent more time shopping for the best mortgage product, their home buying costs should mimic the lower prices men with similar credit profiles pay. Thus, unlike remedies for market-based gender discrimination, women can help close the mortgage lending gender gap without the need for new laws or regulations. Where Gender Might Matter: Older Women and Housing A lthough it is still too early to deter- mine the extent of the long-term finan- cial risks older women face in the housing markets, older Baby Boomer women appear to be especially vulnerable and are at greater risk of having housing insecurity. Older women are increasingly spending up to 50 percent of their income on hous- ing, even if they do not have a mortgage. A study of Rhode Island women found that 29 percent of senior women who owned their homes in 2000 but did not have a mortgage nonetheless were cost burdened. This number jumped to 47 percent in 2013. Women over the age of 65 are more likely than men to live alone and, even if they own their own homes, are more likely to be burdened by their housing costs. No one reason explains why older women are more likely to spend up to 50 percent of their income on housing. Part of the reason older women face higher rates of housing insecurity is because of the gender pay gap. While younger women earn 90 percent of the income men earn, the wage gap increases with age and differences be- tween older women and men are consider- ably larger than the gaps between younger women and men. Because women overall are paid less than men, spend fewer years in the workforce than men, and are more likely to hold part-time jobs that provide more work-life balance than men, older women generally have lower retirement savings. And, because they have longer life expectancies, older women are at an increased risk of outliving their retirement savings and being unable to pay for their housing needs. Where Gender Clearly Matters: Mortgage Lending Discrimination W hile coverture laws no longer prevent women from owning property in their own names, women were discriminat- ed against in housing and lending markets until the Fair Housing Act was enacted.