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Identifying Lending Trends for Borrowers

Black and Hispanic borrowers still remain among the highest demographic to be denied a conventional mortgage according to a study by Zillow. According to the report, 20.9 percent black borrowers and 15.5 percent Hispanic borrowers were turned down for a conventional loan in 2016. This, compared to 8.1 percent of white and 10.4 percent Asian applicants who were denied a loan during the same period.

Despite these statistics, the gap in conventional loan denial rates for black and Hispanic borrowers and white and Asian borrowers is narrowing. The report found that over the past decade conventional loan denial rates for black and Hispanic borrowers fell much farther.

In 2007, 34.3 percent of black applicants and 30 percent of Hispanic applicants were denied mortgage loans, while white and Asian borrowers were denied loans 12.7 percent and 16.2 percent of the time in 2007, respectively. “The percentage point gap between black and white borrowers in 2007 was 21.6 points. Today, that gap is just 12.8 points wide,” the report found.

Yet, there’s a long way to go for denial of conventional loans to black borrowers to fall to the level of denials for white borrowers, the report indicated.

It found that in the mid-1990s blacks were twice as likely to be denied a loan as whites. That gap widened in 2016 with blacks being 2.6 times as likely to be denied a conventional mortgage as white borrowers.

According to Zillow, the situation is similar for loans backed by the Federal Housing Administration (FHA), which focuses on lending programs for borrowers with lower incomes or lower credit scores, or both. The report found that FHA denial rates overall were down, but remained much higher for borrowers of color than for white borrowers. “In 2016, 18.6 percent, 15.3 percent and 14.8 percent of black, Asian, and Hispanic borrowers, respectively, were denied an FHA-backed loan. At the same time, 11 percent of white FHA applicants were denied a loan.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.

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