Low interest rates have prompted millions of Americans to renegotiate their mortgages in 2020, but a host of new and existing obstacles have prevented many black and Hispanic homeowners from taking advantage of this advantage.
While eight million mortgages were refinanced in 2020, only 6 percent of black homeowners and 9 percent of Hispanic homeowners renegotiated their mortgages, the Wall Street Journal reported, citing data from Equifax and Black Knight, among others. That’s up from 12 percent of white homeowners and 14 percent of Asian homeowners.
Freddie Mac estimates that refinancing can now save black and Hispanic households about $ 1,200 a year, but there are many barriers that complicate the process.
Refinancing requires an average of $ 5,000 in upfront closing costs, making it unaffordable for homeowners with more debt and less cash, according to Freddie Mac. The pandemic disproportionately affected the unemployment rate among black and Hispanic households, increasing the likelihood that they will forgo mortgages, which makes them unable to refinance.
Homeowners can also be more hesitant about applying for refinancing programs if they’re struggling to qualify for their first mortgage, Wharton real estate and finance professor Benjamin Keys told the magazine. Research shows that black and Hispanic borrowers much more likely get refused conventional mortgages than white or Asian borrowers.
An additional obstacle is racial bias in the process of evaluation. 2018 Nov. study The Brookings Institution found that discrimination in the valuation of homes resulted in owner-occupied homes in neighborhoods where the majority of blacks were undervalued by an average of $ 48,000.
[The Wall Street Journal] – Alexandra White