Wall St. and Business Wednesdays: Mortgage Denial Rates For Blacks And Native Americans Twice That Of Whites by Dawn Kopecki
U.S. lenders rejected mortgage applications from black and Native American home shoppers more than twice as often as they denied loans for white and Asian applicants in 2002, according to federal housing data recently released.
While differences in annual income accounted for some of the fluctuation in denial rates, white and Asian applicants experienced lower rates of denial than black, Hispanic and native American applicants for all income groups, according to mortgage loan data collected by federal bank regulators.
Bank regulators analyzed residential mortgage data collected from 7,771 lending institutions subject to the Home Mortgage Disclosure Act or HMDA in 2002. The percentage of home purchase applications missing race information decreased last year to 12% from 13% in 2001. While that's a slight improvement over the prior year, it's still a long way off from the 3% in 1993.
The Federal Reserve Board recently revised HMDA data collection rules to require lenders beginning in January 2003 to ask all telephone applicants their race, ethnicity and gender. Those questions were previously optional for telephone applicants and mandatory only for in-person, mail and electronic submissions. Consumers still aren't required to provide that information.
The overall denial rate for all home purchase mortgages continued to decline in 2002, falling to 17% from 21% in 2001 and 28% in 1999. The statistics specifically analyzed applications submitted in 2002 to purchase a home, not to refinance or tap already existing equity.
While denial rates among all minority groups similarly declined in 2002, blacks still had the highest denial rates among all applicants at 26.3%, with Native Americans at 23.3%. Hispanic applicants were denied 18.2% of the time. Denial rates for whites and Asians were at 11.6% and 9.8%, respectively.
"Because of the combination of economic disparities and poverty conditions that (blacks) are facing, they're not in a position where they're able to purchase a home right away," said Margo Clarke, the president and chief executive of a local affiliate of the National Urban League in Richmond, Va. "They have credit issues, they need sufficient income to maintain a home. There has to be more programs in place to better prepare them to purchase a home."
Lending to blacks increased in 2002 by 14.1% after a 7% drop-off in 2001. Lending to Hispanics and whites also increased by 25% and 21.9%, respectively. More than a quarter of all black and Hispanic mortgage applicants sought federally backed loans, compared to 14.2% for whites, 19.3% for Native Americans and 5.8% for Asians.
Income also played a factor in the denial rates with those earning less than 50% of their region's median income, regardless of race, getting rejected 29% of the time in 2002, compared to 37% in 2001. Race figured more prominently among higher income groups, where whites and Asians had dramatically higher approval ratings when compared to other minorities who earn comparably the same amount of money.
Home purchase applications for whites and Asians who earned more than 120% of their regional median income were denied 6.3% and 8.7% of the time, while blacks with comparable incomes were rejected 17% of the time. Native Americans and Hispanics in that same income group were denied 10.7% and 12.9%, respectively.
The disparity between whites and Asians and other minority applicants was even greater for those who earned between 80% and 119% of their regional median income in 2002. Whites and Asians earning that amount were denied at a rate of about 8.8%, while blacks, Native Americans and Hispanics were denied at rates of 20.3%, 15.7% and 16.2%, respectively.
Whites also comprised the largest number of borrowers, with 2.8 million conventional new home purchase loans in 2002. Some 315,000 Hispanics secured conventional new home purchase loans in 2002. Home purchase loans to Asians outnumbered blacks for the first time ever at roughly 194,000. Blacks secured 190,000 home purchase loans, followed by Native Americans with about 14,000.
Dawn Kopecki is a reporter for Dow Jones Newswires and can be contacted via e-mail at: Dawn.Kopecki@dowjones.com
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Wednesday, September 3, 2003