Time for CFPB to act

Better enforcement could improve women's access to loans

As the American housing market slowly heats up in the aftermath of  the Great Recession, it is important to ensure that barriers to mortgage credit do not unfairly restrict any group’s ability to participate in the recovery.

New research questions whether female applicants and women of color have fair and equal access to home mortgage and refinance lending. The Consumer Financial Protection Bureau, under Dodd-Frank Act authority, has the ability to implement changes that would provide more information about what’s happening with respect to potential gender-bias in mortgage lending. But it has yet to act.

Woodstock Institute recently released research findings that raise concerns about whether home mortgage and refinance lenders are discriminating against women and women of color. Further investigation by bank regulators and public release of additional data regarding home mortgage and refinance loans could shed light on whether there is, in fact, discriminatory or disparate treatment of the demographic, or whether other legitimate factors could explain the disproportionate lack of loan originations to women.

Using 2010 Home Mortgage Disclosure Act data for the Chicago six-county region and controlling for loan-to-income ratios, Woodstock Institute found significant disparities in access for women across racial and ethnic groups to mortgages for purchase and refinance compared to men.

Female applicants overall were about 8% less likely to have home-purchase mortgages — and about 21% less likely to have refinance mortgages — originated than male applicants.

Female-headed joint applications with a male listed as a co-applicant overall were 24% less likely to have purchase mortgages originated, and 39% less likely to have refinance mortgages originated than equivalent male-headed joint applications.

Women of color were worse off. The largest disparity was for African-American female-headed joint applications for purchase, which were 34% less likely to be originated, and refinance applications, which were 44% less likely to be originated, than African-American male-headed joint applications.

Latino female-headed joint applications were 19% less likely to have purchase mortgages originated and 29% less likely to have refinance mortgages originated than Latino male-headed joint applications.

These disparities were surprising since no significant difference in the origination rates for male-headed joint applications and female-headed joint applications would be expected: The backgrounds of both borrowers on joint applications are considered by mortgage lenders.

Under established disparate impact doctrine, which was reaffirmed and clarified in a recent Housing and Urban Development rule, home mortgage lending policies that produce a disparate impact on protected classes — including women and people of color — will be determined to be discriminatory unless they serve a significant business objective and no less discriminatory alternative is available to serve that interest.

If this test were applied using only Woodstock Institute research findings, lenders would likely claim nondiscriminatory factors not included in the current HMDA data account to explain why these female applicants’ loans were not originated. Such factors might include the applicant’s credit score, overall debt-to-income ratio or the appraised value of the property.

The Consumer Financial Protection Bureau was granted authority under Dodd-Frank to implement changes to HMDA data collection to add in exactly this kind of information.

Unlike some of the other rule changes mandated by the Dodd-Frank Act, however, Congress did not require the CFPB to issue the new HMDA rules by a specific date.

Because the housing market is heating up and many women will seek home loans in the near future while interest rates and home prices remain relatively low, I urge the federal regulators, the HUD and the Department of Justice to investigate lenders’ underwriting practices and policies with respect to their impact on women — now.

They can gain access to lending information that is not available through the HMDA to determine whether fair lending violations exist and, if warranted, bring enforcement actions.

In addition, I urge the CFPB to issue the new HMDA rules as soon as possible. With access to fuller data, fair housing advocates, researchers and others can help to ensure women’s fair and equal access to credit and housing opportunities. 

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