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The Intersection of Mortgage Lending, Foreclosures, and Race

African-Americans are twice as likely to be denied a mortgage when controlling for income, according to a Clever.com study.

The study, which analyzed Home Mortgage Disclosure Act (HMDA) data from the Federal Financial Institution’s Examination Council (FFIEC) about applicant and borrower characteristics, revealed that applicant data points were limiting and that HMDA’s data set is missing important variables like why applicants were denied.

In fact, it found that 52% of black applicants had no reason listed for their mortgage being denied.

Amongst its key findings, the study said that when controlling for income, the disparity between white and black mortgage approval rates was most pronounced in the South. Eighty-nine percent of white applicants are approved in Southern states, compared to 76% of black applicants, it indicated.

The states where black applicants are least likely to get approved included Kansas, South Carolina, Mississippi, Louisiana, Arkansas, Delaware, and Alabama. In South Carolina, the study said that 49% of black applicants were denied applications compared to 8% of white applicants, not controlling for income.

While it found the least racial disparity in mortgage lending in the West, the study said that "the difference between approval rates is still statistically significant, indicating racial discrimination in the mortgage industry is a nationwide issue."

It found four exceptions to this rule. In Montana, Idaho, Hawaii, and Vermont the number of mortgage loan denials were higher for white borrowers than Black. Additionally, in these states, the discrepancy between black and white approval rates is less than 7%.

Looking at borrowers by race, it indicated that "mortgage applicants are predominantly white." Out of the sample of 1.7 million applicants analyzed by Clever.com, more than 1.4 million mortgage applicants were white, compared to 80,442 African Americans, 93,762 Asian Americans, 29,293 American Indians, and 15,645 Native Hawaiians or Pacific Islanders.

The study also found that African-Americans and Hispanics were more likely to be at risk of foreclosures. This, because African-Americans (105%) and Hispanics (78%) were more likely to use high-cost mortgages to purchase a home.

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she 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 Houston, Texas.
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