New Mortgage Data: Racial Differences in Home Loans in the Americas

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According to a new study of racial inequality in lending, black job seekers in eight metropolitan areas of the Carolina are more likely to be denied a home loan than whites with similar financial profiles.

The results reflect the differences seen across much of the U.S. and challenge the industry’s longstanding rationale that higher bounce rates are due to differences in financial characteristics rather than race.

Blacks, Hispanics and Asians were identified in reports from the non-profit editorial office of The Markup. potential borrowers were refused at higher rates than white applicants, despite similar lending requirements such as debt-to-income ratios and loan size relative to the value of the home they are trying to buy.

In 89 US metropolitan areas, minority applicants were more likely to be denied regular mortgages than similarly qualified white applicants, according to 2019 federal data contained in the Residential Mortgage Disclosure Act.

While doing better than other metro areas in Carolina, black candidates in the Charlotte metro area are 1.5 times more likely to be rejected than whites.

Among them are such borrowers as Crystal Marie and Eskias McDaniels, who, despite high credit ratings, high incomes and savings on the down payment, got several rejections from the underwriting department of their loan officer.

“I think it would be very naive for someone like me not to consider that race played a role in this process,” Crystal Marie, who is Black, told Markup.

The Charlotte-Concord-Gastonia Metropolitan Statistical Area includes Mecklenburg and surrounding counties in North Carolina, as well as three counties in South Carolina.

The Markup, which published its investigation with the Associated Press on Wednesday, shared the data with reporters across the country. The Charlotte Observer and (Raleigh) News & Observer analyzed the credit inequality data collected in The Markup reports to assess the impact on North and South Carolina.

Among the findings:

  • In eight metro areas in Carolina, statistically significant differences were observed between whites and non-whites.

  • In Wilmington and Florence, the differences were greatest in North and South Carolina, where black candidates were 2.4 and 2.5 times more likely to be rejected than whites with the same qualifications, respectively.

  • Greensboro High Point had the highest statistically significant gap among Hispanic applicants in the Carolina. They are 2.7 times more likely to be rejected than whites.
  • The Markup report found that the algorithms used by lenders contribute to this inequality because they prioritize traditional lending, which white Americans have historically had more access to.

  • Candidate credit ratings were not included in the data analysis because federal officials do not include them in HMDA disclosures, citing borrower privacy.

Home ownership is considered a major factor in generating wealth for generations and is often the largest household investment.

Experts say persistent racial disparities in lending have a long-term impact on the financial stability of families, decades after racial discrimination in housing was outlawed by the Fair Housing Act of 1968.

History of discrimination

The data came as no surprise to Floyd Davis, CEO of the Charlotte company. housing non-profit organization Community Link… According to him, this inequality is rooted in pre-existing discriminatory laws.

Among them: the “red line” policy, which deprived blacks and other minorities of access to credit to increase housing segregation; a federal urban renewal program that destroyed and displaced black neighborhoods; and excluding black veterans from military law benefits such as low-interest mortgages.

Davis said that persisting differences in loan refusal rates only exacerbate these historical misconceptions, Davis, whose organization works with the homeless to find rental housing and work on home ownership, said Davis.

“These are still part of the structural system that has been created, and they are still in place today,” he said.

Rochelle Sparko is North Carolina’s director of policy Responsible Lending Center, a non-profit research and policy group based in Durham. She said that a history of discriminatory policies has enabled many white families over the decades to create types of wealth that can boost traditional credit metrics today.

For example, she said, color-coded loan applicants are more likely to be saddled with student loan debt, which could damage their credit score or make it difficult to accumulate funds for a down payment.

“You can’t just change the rules and … and expect things to work out after decades of helping white families,” she said. “By itself, it will not align, just as it has become racially incomparable by itself.”

When people of color are denied loans while white borrowers with similar qualifications are accepted, it deprives those households of the opportunity to build wealth and stability, Davis said.

What solutions are there?

Organizations like Greensboro Housing Consultants Group are working to bridge the gap at the local level.

Black applicants in the Greensboro-High Point metro area were 1.8 times more likely to be denied a loan than their white counterparts in 2019, and that same year, a housing nonprofit and the City of Greensboro set the 100 Homes goal for the first time. help buyers with the down payment and navigate the process.

The program helped 317 families close their homes in 2019 and 347 in 2020, nearly three-quarters of them colored.

But the problem goes beyond individual programs, said Sofia Crisp, the organization’s founder and CEO.

“Equitable housing requires constant discussion,” she said. “So realtors and lenders are thinking, ‘What you do has consequences, and if you do something that is considered a violation of fair housing law, it will have consequences.’

There is no easy solution to the problem of racial inequality in mortgage lending, Sparko said.

Eliminating student debt will have a significant impact on many color borrowers, she said. The Center for Responsible Lending also advocates stricter enforcement of the Fair Housing Act.

Ultimately, she said, it will take more than just “racially neutral” lending to level the playing field.

“So much of our history of race-building wealth and discrimination is so deeply ingrained right now,” Sparko said. “Much has to happen to promote it meaningfully and broadly.”

David Raynor, editor of the News & Observer database, contributed to this report.

Charlotte Observer Stories

Lauren Lindstrom is a Charlotte Observer correspondent for affordable housing. She previously wrote about health for The Blade in Toledo, Ohio, where she wrote about the state’s opioid crisis and childhood lead poisoning. Lauren is a Wisconsin native, a Northwestern University graduate and a 2019 member of the United States Corporation.
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Hannah Lange covers banking and finance for The Charlotte Observer. She studied business journalism at the University of North Carolina at Chapel Hill and grew up in the same city as her alma mater.



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