42
DISPARITIES IN
LENDING AND
FORECLOSURE
African-Americans are twice as likely to
be denied a mortgage when controlling for
income, according to a Clever.com study.
e study, which analyzed Home
Mortgage Disclosure Act (HMDA) data
from the Federal Financial Institution's
Examination Council (FFIEC) about
applicant and borrower characteristics,
revealed that applicant data points were
limiting and that HMDA's data set is missing
important variables like why applicants were
denied.
In fact, it found that 52% of black
applicants had no reason listed for their
mortgage being denied.
Amongst its key findings, the study
said that when controlling for income, the
disparity between white and black mortgage
approval rates were most pronounced in
the South. Eighty-nine percent of white
applicants are approved in Southern states,
compared to 76% of black applicants, it
indicated.
e study also found that African-
Americans and Hispanics were more likely
to be at risk of foreclosures. is, because
African-Americans (105%) and Hispanics
(78%) were more likely to use high-cost
mortgages to purchase a home.
e states where black applicants are least
likely to get approved included Kansas, South
Carolina, Mississippi, Louisiana, Arkansas,
Delaware, and Alabama. In South Carolina,
the study said that 49% of black applicants
were denied applications compared to 8% of
white applicants, not controlling for income.
While it found the least racial disparity in
mortgage lending in the West, the study said
that "the difference between approval rates is
still statistically significant, indicating racial
discrimination in the mortgage industry is a
nationwide issue."
It found four exceptions to this rule. In
Montana, Idaho, Hawaii, and Vermont the
number of mortgage loan denials were higher
for white borrowers than black. Additionally,
in these states the discrepancy between black
and white approval rates is less than 7%.
Looking at borrowers by race, it indicated
that "mortgage applicants are predominantly
white." Out of the sample of 1.7 million
applicants analyzed by Clever.com, more than
1.4 million mortgage applicants were white,
compared to 80,442 African-Americans,
93,762 Asian-Americans, 29,293 American
Indians, and 15,645 Native Hawaiians or
Pacific Islanders.
