According to a recent report by LendingTree, Black borrowers seeking to obtain a mortgage are more than twice as likely to be denied than the general population. These issues are considered to be a combination of factors, including economic disparity between black borrowers and other home-seekers, as well as the risk of discrimination by lenders. This data goes to show how much harder it still is for Black home-seekers to buy real estate.
What the Data Says
The LendingTree report, which is based on data from the 2020 Home Mortgage Disclosure Act, says that the average denial rate for mortgage applications was around nine percent for the general population. For black people, however, the average denial rate was around eighteen percent, twice as high as for the general population. In some places, like St. Louis, the denial rate is closer to three times as high for Black people, where they suffer a denial rate of 20.73% compared to 7.33% for the overall population. Meanwhile, in places like San Francisco, the difference in denial rate was 11.79% for Black borrowers compared to 9.44% for the general population.
What This Means
In effect, black borrowers are twice as likely to be denied a mortgage application compared to everyone else, making it harder for them to purchase a home. While some of this can be attributed to black borrowers having lower income compared to white borrowers, there is also an extent to which it can be attributed to discrimination by lenders. Despite the existence of anti-discrimination laws like the Fair Housing Act, black home-seekers still face hurdles obtaining home ownership.
Why This Matters
For many people, purchasing a home is both a major signifier of economic success and a step towards building intergenerational wealth. Only 45% of black respondents in a recent Harvard survey say they lived in a home that they owned, compared to 65% of respondents overall, making them the group least likely to live in a home that was owned. This is important because people who own their homes can pass them down to children or sell them for equity, while renters have no such opportunity.
What You Should Do
The first thing to do as a prospective home-owner is not to lose faith, even if you have been rejected for a mortgage multiple times. Even if one lender has rejected you, another might be more open. In addition, if you believe you have been discriminated against in your search for a mortgage, you should report them to your state’s attorney general or the U.S. Department of Housing and Urban Development.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
