Black American homebuyers are much more likely to have their mortgage applications turned down compared to the overall borrowing population, with even greater disparities in cities like Boston and Jacksonville, according to new analysis from LendingTree.
In fact, using data from the Home Mortgage Disclosure Act of 2020, LendingTree found that on average, the mortgage purchase rejection rate for Black homebuyers in each of the 50 largest regions metropolitan areas nationwide was twice as high: an average of 18% of black homebuyers were refused a mortgage, while the average refusal rate for the general population was 9%.
In some cities, this gap was even worse: in St. Louis, Missouri, the mortgage rejection rate for black buyers was 20.73%, compared to the overall mortgage rejection rate of 7, 33%, the worst gap observed by LendingTree.
Boston, Jacksonville, Raleigh, New Orleans, Pittsburgh, Oklahoma City, Richmond, Detroit and Chicago are other cities with significant disparities between the mortgage rejection rate of Black homebuyers and the overall population of borrowers. . Cities with the smallest gap included San Francisco, which had an overall purchase mortgage rejection rate of 9.44% compared to an 11.79% rejection rate for black buyers, as well as Sacramento and Seattle.
“While discriminating against a homebuyer on the basis of their race is illegal, it still happens,” Jacob Channel, senior economist at LendingTree and author of the report, said in a statement. “It is for this reason that lenders and individuals must learn to spot the signs of discrimination in order to better avoid it.”
Indeed, for generations, black Americans have found it difficult, if not impossible, to get money to buy a home, often on purpose. This has contributed to a gaping racial wealth gap.
““Millions of Black Americans own their homes despite many heightened barriers they may have faced.””
Perhaps most infamously, the Home Owners Loan Corporation drew maps in cities across the country to delineate neighborhoods it deemed “at risk” for loans in the 1930s. Black neighborhoods were often marked in red to demonstrate their supposed “risk” and were denied access to fair credit as a result.
While the Fair Housing Act of 1968 outlawed the practice of redlining, other housing disparities that rob blacks of their full ability to create wealth persist to this day: homes in black neighborhoods tend to have lower land values, but their owners have consistently suffered higher tax burdens. , for example.
A 2018 analysis of lending disparities also found a “modern red line” that kept blacks and Latinos in dozens of metropolitan areas from homeownership, even after controlling for factors such as income.
Mortgage denial rates may also remain high for Black Americans due to lower household incomes and wealth compared to other racial groups, LendingTree noted in its analysis, though these disparities may also be linked to racist policies and practices that sought to reduce opportunities for black people. people.
LendingTree recommended that black borrowers seek out a mortgage lender, consider different types of loans if they are having difficulty getting approved for a standard mortgage, and file a complaint with a local, state or federal authority. they feel discriminated against in the process.
“Millions of Black Americans own their homes despite many heightened barriers they may have faced,” the report said.