Despite improvements in mortgage access for borrowers over the last few years, the latest federally released data from the Home Mortgage Disclosure Act has done nothing to reverse an unfortunate fact‒‒black and Latino borrowers remain far less likely than white and Asian borrowers to be approved for conventional loans.
While the number of minority borrowers being denied is dropping, down from 30.5 to 22.4 percent of blacks and from 25 to 17 percent for Latinos, the numbers remain greater than white and Asian borrowers. Asian borrowers were, by comparison, turned down 11 percent of the time, while white borrowers were turned down 8.7 percent of the time. Overall, 10.4 percent of all conventional loan applications were denied in 2015, a drop from 14.2 percent in 2010.
Zillow chief economist Svenja Gudell said that the downswing in denials among non-whites and non-Asians is better than the alternative, there’s still a long way to go.
"Even though conditions have improved over the past few years, getting approved for a mortgage is still a significant barrier for some would-be buyers,” Gudell said. "Owning a home is an important way for the middle class to build personal wealth. It's encouraging to see more black and Hispanic borrowers getting approved for mortgages, but there's still a lot of progress that needs to be made."
Zillow released an analysis of the HMDA data Thursday and found that minority borrowers in Florida had the most trouble overall in 2015. Black borrowers in Orlando, Tampa, and Miami were denied about 25 percent of the time. Those same Florida cities also reported denial rates above 10 percent for white borrowers. Las Vegas, New York, and Chicago were the only other markets to do so.
Detroit, Chicago, Philadelphia, New York, and St. Louis also had denial rates above 20 percent for black borrowers. Hispanic borrowers faced similar troubles, most notably in Columbus, Ohio, where more than 20 percent were denied loans.
“The problem is so entrenched,” Zillow reported, “that last week Fannie Mae and Freddie Mac announced programs designed to improve access to credit for these groups, which have historically had the lowest homeownership rates[ii] even though they are more likely to place a higher value on owning a home.”
The irony is, black and Hispanic borrowers are more likely to see owning a home as a fulfillment of the proverbial American Dream. According to Zillow, 68 percent of Hispanic and 65 percent of black respondents to a company survey said homeownership was necessary to living that dream. By comparison, 59 percent of white respondents and 58 percent of Asian respondents felt the same.
Homeowners are becoming increasingly diverse, data from the Zillow Group Consumer Housing Trends Report show. “Even so,” the company reported, “the homeownership gap between black and white households is as wide in 2016 as it has been for the past century.”