JSMedia – A new report from The Markup reveals that dozens of mortgage lenders have statistically significant disparities in lending. Among the seven lenders with the highest racial and ethnic disparities, DHI Mortgage, is one of the most discriminatory. Black applicants are 80 percent more likely to be denied loans than White applicants. These findings are particularly troubling given the company’s association with D.R. Horton, the nation’s largest homebuilder.
In 2019, more than 5,500 companies reported data on loan application data to the federal government. However, only the top 1% of mortgage lenders processed enough applications to make a statistically significant difference. In its study, The Markup found that there were 24 major mortgage companies with statistically significant disparities in lending practices. The findings are alarming, as the number of minority and non-White applicants denied loans by these mortgage companies surpassed the rate of White applicants.
The data showed that racial and ethnic disparities in mortgage loan approvals was a key factor in the report. While many of these lenders ran applicants through Fannie Mae or Freddie Mac’s proprietary underwriting software, the findings did not support these claims. Despite the lack of clear evidence, the data show that the biggest racial and ethnic disparities in denials among mortgage lenders were due to the lack of diverse populations.
Dozens of Mortgage Lenders Showed Significant Disparities in Lending
Despite the disparities, these results suggest that many lenders do not follow best lending practices. In particular, minority applicants are more likely to be rejected by mortgage lenders than Whites. Even if you are white, your chances of approval are much lower than those of a different race. A recent study by The Markup analyzed over two million loan applications, finding that dozens of mortgage lenders had significant racial and ethnic groups. The findings of the study are consistent with the findings of other studies.
While racial and ethnic disparities have been a major cause of disparities in mortgage lending, it is still hard to understand why this is the case. The industry argues that the gap is due to differences in income and other financial circumstances. And the report says that the gap has been growing for some time and has never been more severe. In spite of the findings, the industry has been reluctant to acknowledge any racial biases in its lending practices.
The CFPB also found that some mortgage lenders violated the Equal Credit Opportunity Act by discriminating against African Americans and non-Hispanic white borrowers. Furthermore, the government’s Equal Housing Opportunity Commission said that the findings should be made public and the CFPB should pursue legal action. The CFPB’s new initiative should be successful if it can help the victims of these discriminatory practices.
In Chicago, JPMorgan Chase was found to have the most severe white-to-black disparity of all home purchase lenders. The bank loaned 41 times more to black homeowners than to white homeowners, and invested 2.4 cents for every dollar to white neighborhoods. In Lake View, a predominantly white neighborhood in Chicago, the bank loaned nine times more to black applicants.
These disparities in lending are also based on the race of the neighborhood. While this may sound like a small amount, it adds up to $765 million a year in additional mortgage costs for black and Latino borrowers. Historically, people of color have faced higher hurdles when trying to obtain a home loan than their white counterparts. This disparity has been exacerbated by the fact that the government’s redlining maps have not been updated since 1980.
Despite the disparities between the white and black neighborhoods, some white neighborhoods are overrepresented in the list of mortgage lenders. Moreover, the lenders in Chicago have significant disparities in lending. Those living in black and Latino neighborhoods face more discriminatory treatment from mortgage brokers. And while the white neighborhoods are the most common areas in which they received home loans, the minority communities were disproportionately impacted.