Mortgage

Black mortgage applicants denied 84% more often

Black mortgage applicants denied 84% more often
Written by Publishing Team

According to a Zillow analysis released Thursday, black mortgage applicants are more likely to be denied a mortgage than white borrowers, even with lower overall rejection rates.

The black homeownership rate, which rose before the pandemic, is beginning to decline, in part because of the expanding mortgage approval rate. Black applicants are being denied a mortgage at an 84% higher rate than white applicants, an increase from 2019, the last year before the pandemic, when the disparity was 74%. In the United States, 19.8% of black applicants are denied a mortgage, the highest rate among all races, and much higher than the 10.7% of white applicants who are denied.


“Homeowners have seen a large number of housing gains during the pandemic, but the growing disparity between black and white home ownership rates and home values ​​actually paints the picture of these winners,” Zillow economist Nicole Bashod said in a statement. “While credit borrowers in general are stronger now than ever before, the gap in access to credit is growing along racial lines. Policies and interventions that target barriers that prevent black Americans from owning homes are keys to achieving housing equity.”

More than 6% of black applicants were rejected based on credit history, accounting for more than a third (37%) of all black borrower rejections. The traditional limited financial services of black and other societies of color is an important factor in credit history. Zillow found that black communities have more non-traditional services, such as payday lenders, which contribute to poor credit health.

While the rate of black home ownership has risen from the depths it reached in the aftermath of the Great Recession, it is still well below its peak of 49.7% in 2004. Black-owned home values ​​still lag behind those of other races, It still equates to 16.7% fewer homes overall. Black-owned homes are rising in value at higher rates than homes overall, but it could take more than 22 years to catch up, at this year’s projected growth rates.

Households of color, as well as renters and low-income families, were more likely to report facing housing and economic challenges due to the pandemic. Black households were more likely than white households to report a job or loss of income and difficulty keeping up with mortgage or rent payments. Zillow said that the pandemic’s disproportionate impact on black families has halted efforts to close gaps in access to credit, home ownership, home values ​​and mortgage rejection rates, slowing the journey to equity even more.

While there has been progress in increasing black home ownership since the Great Recession, many challenges remain on the path to achieving justice. Zillow said closing the credit and financial access gap is a good start to get more black renters down the path of home ownership. Zillow said the recent adoption of Fannie Mae and Freddie Mac’s policies to allow rent payments to be based on credit history is a step in the right direction and a good example of how the policies can be used to target these issues.

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