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Mortgage Lending Discrimination Still Prevalent |
While overall homeownership rates are soaring to all-time highs, minority homeownership rates lag far behind. The reasons for the continuing racial disparity in homeownership rates may be more subtle now than they were a few decades ago, but they are not less debilitating. Minorities trying to buy homes still face discrimination from mortgage lending institutions, according to a new report commissioned by HUD. What We Know About Mortgage Lending Discrimination in America finds that minorities are less likely than whites to obtain mortgage financing and, if successful in obtaining a mortgage, tend to receive less generous loan amounts and terms. "Not all Americans enjoy equal access to the benefits of homeownership, in part because of unequal access to capital," the report states.
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1997 American Housing Survey Data Released
American Housing Survey for the United States, 1997 presents a wide range of data from the 1997 American Housing Survey (AHS), sponsored by HUD and conducted by the U.S. Census Bureau. The book contains more than 400 pages of tables, including data on apartments; single-family homes; mobile homes; vacant housing units; age, gender, and race of householders; income; housing and neighborhood quality; housing costs; equipment and fuels; and size of the housing unit. The book also presents data on mortgages, rent control, rent subsidies, previous unit
of recent movers, and reasons for moving.
The survey is conducted by field representatives who obtain information from the residents living in each housing unit. The AHS is a national sample of about 53,000 interviews conducted every other year. AHS data are presented nationally as well as for major selected metropolitan areas. For data users whose needs are not met by the book tabulations, microdata are available on tapes and CD-ROMs, allowing users to tabulate information as they desire. Microdata are also available on the Internet.
American Housing Survey for the United States, 1997 is available from
HUD User for $5. Please use the order form.
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The study provides a comprehensive review and reanalysis of the best available evidence on possible discrimination by mortgage lenders and assesses evidence of discrimination at each stage in the mortgage lending process. The report presents three major findings:
- Discrimination can begin at the early stages of the mortgage lending process, including pre-application inquiries by would-be borrowers. Overall, minorities received less information about loan products, less time and information from loan officers, and were quoted higher interest rates.
- At later stages of the process, racial disparities in loan denial rates cannot be "explained away" by differences in creditworthiness or by technical factors affecting the analyses of denial rates.
- Good intentions on the part of lenders are not enough. Examination of the mortgage loan origination process from an individual lender's perspective suggests that even among institu-tions with good intentions, and where loan officers take pride in working with borrowers who need additional help on loan applications, minority customers may not be receiving equal treatment.
What We Know recommends next steps in measuring mortgage discrimination and developing policies and practices to better combat it. The report makes the following recommendations:
- Expand research on lender decisions about office locations, advertising, and outreach, as well as research on referrals that may discourage minorities from applying for loans with some institutions.
- Increase testing at the preapplication stage, and possibly the loan approval stage as well, for research, enforcement, and self-assessment by lenders.
- Conduct nationwide studies of mortgage lending practices, including analysis of mortgage loan performance to determine the "business necessity" of lending criteria and procedures that disproportionately disadvantage minorities.
- Expand research on loan terms and conditions, including examination of relatively recent market trends such as risk-based pricing and credit-scoring formulas, and analyses of overages and fees.
- Evaluate rigorously fair lending "best practices" to find out what really works to increase lending to traditionally underserved groups.
The report concludes that lending institutions need tools that they can use to monitor and assess their own antidiscrimination efforts. What We Know reports that "while the 'stick' of litigation or regulatory action creates important incentives for lenders to care about the potential for discrimination in their policies and procedures, lenders cannot take action if they do not realize that they are discriminating."
Order What We Know About Mortgage Lending Discrimination in America is available from HUD USER for $5. Use the order form.
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