A recent Zillow Group analysis of mortgage access and homeownership rates shows that it is becoming increasingly easier for many Americans to get approved for home loans, but minority borrowers are still facing higher mortgage denial rates than their white counterparts.
Zillow’s analysis adds insight into the most recent Home Mortgage Disclosure Act (HMDA) data, released in September, which showed that black, Hispanic and Asian borrowers had notably higher denial rates in 2014 than white borrowers.
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According to Zillow, which compared how different racial groups experienced the housing crisis, black and Hispanic borrowers are lagging behind in the recovery. About 28 percent of mortgage loan applications submitted by black borrowers were denied in 2013; this number fell slightly to around 25 percent last year.
For Hispanic applicants, the denial rate was around 22 percent in 2013 and around 19 percent in 2014. For Asian applicants, the denial rate was about 13 percent in 2013 and just over 12 percent in 2014.
Overall, the denial rate for all U.S. conventional mortgage applications was about 11 percent last year and about 12 percent in 2013, Zillow said.
“Despite that improvement, there is still significant disparity in mortgage access among racial groups,” Zillow said.
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Blacks made up 12 percent of the U.S. population in 2014, but only 3 percent of conventional loan applicants, the company said. And of that 3 percent of loan applicants, only 2.5 percent of applications were approved. Hispanics make up 17.3 percent of the U.S. population, but represent only 6.1 percent of applicants and 5.5 percent of approved applicants for conventional loans.
By comparison, whites, who make up 62 percent of the population, comprised nearly 70 percent of all conventional loan applicants, of which nearly 72 percent were approved.
In addition, while white neighborhoods have nearly recovered to their peak values since the housing market crashed, black communities’ values are still 16.7 percent below peak and Hispanic communities’ values are about 20 percent below peak.
Denial rates for minority borrowers are especially a problem in: New York and Northern New Jersey, Chicago, Los Angeles and Dallas-Ft. Worth, Texas, Zillow said.
The company said minority mortgage denial rates are lowest in San Jose, California; Columbus, Ohio; Sacramento, California; Nashville; and Kansas City, Missouri.
According to the 2014 HMDA report, previous research and experience gained in the fair lending enforcement process show that differences in denial rates and in the incidence of higher-priced lending among racial or ethnic groups stem, at least in part, from factors related to credit risk that are not available in the HMDA data, such as credit history and loan-to-value ratios.
Differential costs of loan origination and the competitive environment also may bear on the differences in pricing, as may differences across populations in credit-shopping activities, the report suggested.
