White and Asian borrowers are more likely to be approved for a conventional loan than black and Hispanic borrowers, according to a recent report. (Download a table of mortgage information by state in PDF format).
The report released Thursday, Nov. 3 by Zillow, an online real estate database company that produces housing data and research covering more than 450 markets in the U.S., contends that the disparity persists despite improvements in mortgage access for borrowers since the economic downturn in 2008.
“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,” said Zillow chief economist Svenja Gudell. “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.”
In 2015, 22.4 percent of black applicants were denied conventional loans, according to data obtained by Zillow via the Home Mortgage Disclosure Act (HMDA). In 2010, 30.5 percent of black applicants were denied. Among Hispanic applicants, 17.3 percent were denied in 2015, down from 25 percent in 2010.
Representatives from Zillow said that “the problem is so entrenched 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, even though they are more likely to place a higher value on owning a home.”
According to the Zillow Housing Confidence Index, 68 percent of Hispanic respondents and 65 percent of black respondents considered homeownership necessary to living the American dream.
In comparison, 59 percent of white respondents and 58 percent of Asian respondents felt the same.
In D.C., the denial rates for conventional loans for black applicants in 2015 stood at 15.4 percent versus 5 percent for white applicants.
“Homeowners are becoming increasingly diverse, data from the Zillow Group Consumer Housing Trends Report show,” Zillow said in a statement. “Even so, the homeownership gap between black and white households is as wide in 2016 as it has been for the past century.”
Mel Watt, director of the Federal Finance Housing Agency, echoed the report’s findings during a speech last month in Boston at the Mortgage Bankers Association Annual Convention and Expo.
“While the 2015 HMDA data released last month shows modest gains in the percentage of African-American and Hispanic borrowers across the housing market, overall home ownership for these groups remains low,” Watt said. “Purchase loans for African-American borrowers increased from 4.9 percent of the market in 2014 to 5.2 percent in 2015. Similarly, the percentage for Hispanic borrowers increased from 7.5 percent to 7.9 percent.
“All of these figures are, of course, well below the percentage of these minority groups in the population, and the disproportionate impact of the crisis for people of color has resulted in even more ground to be made up,” Watt said. “While there are many layers to the challenge of finding a way to address this disproportionality, homeownership has historically been the primary means of acquiring and maintaining wealth in minority communities.
“So finding responsible ways to improve access to mortgage credit by minority borrowers would represent an important opportunity both for these borrowers and for other participants in the housing sector,” Watt said.