Mortgage

Black resident mortgage applications nearly twice as likely as whites to be denied

A new study by real estate company Zillow found that nearly 20% of black mortgage applications nationwide were denied in 2020, nearly twice the rate of white applications.

Nationally, the study found that black mortgage applicants were rejected 84% more than white applicants, up from 74% in 2019.

Zillow said the findings, based on Federal Mortgage Disclosure Act data, help explain the home ownership gap between blacks and whites. According to the United States Census, 44% of blacks own a home (down from 49.7% in 2004), compared to 74% of whites and 48.3% of Hispanics.

“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 ​​paints a picture of who the winners actually are,” said Nicole Baswood, Zillow economist, in a press release about the study. .

The study looked rigorously at mortgage denials, and did not address whether different genders with similar incomes, credit scores, repayment history or other loan criteria were approved at different rates.

But the study sheds light on the reasons why blacks are denied mortgages.

Zillow found that more than 6% of black applicants were denied due to credit history, accounting for 37% of all Black mortgage denials, illustrating the Blacks’ historical lack of access to credit.

“While credit borrowers are stronger now than ever, the gap in access to credit is growing along ethnic lines,” Baschod said.

In the study, Zillow praised efforts to expand Black’s access to credit, such as recent decisions by federal mortgage services Fannie Mae and Freddie Mac to allow rent payments based on credit history.

Zillow found that black mortgage applicants were rejected most often in Mississippi (31%), Louisiana (26.1%), Arkansas (26%) and South Carolina (25.8%).

Zillow also noted that black-owned homes are 16.7% less valuable than homes overall. While black-owned home prices are rising at higher rates than homes overall, it will take more than 22 years to make up for it, at current rising rates, according to Zillow.

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