Racial disparities in homeownership are partially contributed to by the mortgage industry, according to a new report from LendingTree.
LendingTree’s new report took a look at the 2022 Home Mortgage Disclosure Act (HMDA) data, and found that the share of Black homebuyers denied mortgages is notably higher than the share among the overall population.
Specifically, the report found that the purchase mortgage denial rate for Black homebuyers across the 50 largest U.S. metros is an average of 5.30 percentage points higher than the denial rate for the overall mortgage borrower population.
Key highlights:
- On average, 14.44% of Black homebuyers are denied a mortgage—5.30 percentage points higher than the average denial rate of 9.14% across the overall population.
- Buffalo, Raleigh and Boston have the largest percentage point differences between the denial rates for Black borrowers and the overall borrower population. Across these metros, the denial rate for Black borrowers is an average of 8.89 percentage points higher than the overall mortgage denial rate.
- In addition, the denial rates for these metros for Black borrowers are higher than those in most of the nation’s other largest metros, at 18.43%, 15.89% and 16.16% respectively.
- Salt Lake City, San Antonio and Houston see the smallest percentage point differences between the denial rates for Black borrowers and the overall borrower population. The average spread between denial rates in these three metros is a relatively low 1.78 percentage points.
- Denial rates for Black borrowers are highest in Miami, Detroit and New Orleans and lowest in Salt Lake City, Kansas City and Minneapolis. Across Miami, Detroit and New Orleans, the average denial rate for Black borrowers is 20.70%—more than double the average denial rate of 10.19% across Salt Lake City, Kansas City and Minneapolis.
- Though denial rates for Black borrowers can vary across the nation’s 50 largest metros, they’re higher than 10.00% in all but one—Salt Lake City, with a denial rate of 9.24%.
- The spread between denial rates for Black applicants and the overall population of applicants decreased from 2021 to 2022. The average spread was 5.59 percentage points in 2021, slightly higher than 5.30 percentage points in 2022.
- From 2021 to 2022, the denial rate for Black borrowers across the country’s largest metros decreased from an average of 16.35% to 14.44%.
Major takeaway:
“While the reasons behind the disproportionately high denial rates among Black homebuyers can be difficult to pin down, various factors likely contribute to this disparity,” said Jacob Channel, LendingTree’s senior economist and author of the report.
“For example, Black Americans tend to have lower incomes and less household wealth than members of many other racial groups—namely white Americans. Because lenders usually consider factors like income when issuing loans, Black Americans earning less money can make getting approved for a mortgage more difficult,” continued Channel. “Further, the legacies of historical policies meant to disenfranchise Black homebuyers, like illegal “redlining” and other discriminatory practices—for example, offering a borrower worse terms on their loan because of their race—also likely contribute to the disproportionately high denial rates for Black borrowers.”
Channel concluded, “That said, it’s important to note that becoming a homeowner isn’t impossible for all Black buyers. And even though they may be less likely to own a house, millions of Black Americans are still homeowners despite heightened obstacles.”
For the full report, click here.
