Black Homeownership

HMDA data presents sobering picture of Black homeownership in 2019

Black and Hispanic borrowers had notably higher denial rates in 2019 than non-Hispanic white and Asian borrowers

The recent murder of George Floyd and its stirring aftermath has put racial inequality in the forefront. 

The latest Home Mortgage Disclosure Act data, summarized in a report from the Consumer Financial Protection Bureau on Thursday, sheds some light on the state of Black homeownership in 2019, and unfortunately, it’s not terribly surprising.

Black homeownership inched upward in 2019 but remained far behind Asian, white and Hispanic homeownership, according to the report.

Specifically, Black borrowers’ share of home-purchase loans rose slightly to 7% in 2019, compared with 6.7% in 2018. This marked the sixth consecutive year of an increase. Meanwhile, non-Hispanic white borrowers’ share of home-purchase loans was 60.3% in 2019, down from 62% in 2018.

Perhaps more disturbingly, as in prior years, Black and Hispanic white borrowers had notably higher denial rates in 2019 than non-Hispanic white and Asian borrowers. For example, the denial rates for conventional home-purchase loans in 2019 were 16% for Black borrowers and 10.8% for Hispanic white borrowers. By contrast, denial rates for such loans were 8.6% for Asian borrowers and 6.1% for non-Hispanic white borrowers. 

On the plus side, denial rates on home-purchase applications overall declined in 2019 compared to 2018. However, the rate of decline varied by racial/ethnic group and types of loans. For example, for conventional and nonconventional applications combined, denial rates for non-Hispanic whites declined from 7.9% in 2018 to 7.0% in 2019 (a 1% drop) compared to a smaller (8%) decline for Blacks, from 17.4% to 15.9%.

The reason for such a discrepancy, the report claimed, “may stem, at least in part, from factors related to credit risk” such as credit history, ratio of total monthly DTI (debt-to-income) ratio, and combined loan-to-value (CLTV) ratio.

Historically, lenders could, but were not required to, report up to three reasons out of nine potential reasons for denying a mortgage application. The 2015 HMDA rule changed reporting of denial reasons from optional to mandatory, required reporting of up to four denial reasons, and added a mandatory free-form text field to fill in when reporting a denial for “other” reasons.

The DTI ratio was overwhelmingly the most common reason for denial of home-purchase applications, according to the report. Earlier this week, we reported on how the CFBP had announced two notices of proposed rulemaking surrounding what’s commonly known as the QM Patch. One of those rulemakings would remove the debt-to-income requirement from qualified mortgages.

Another data point that stands out regarding minority borrowers is the incidence of higher priced lending. From the report: “As in earlier years, Black and Hispanic white borrowers were more likely to have higher-priced conventional and nonconventional loans in 2019. For home-purchase loans, 22.3% of loans to Black borrowers and 23% of loans to Hispanic white borrowers were higher-priced, compared with 8.3% of loans to non-Hispanic whites. For refinance loans, 7% of loans to Black borrowers and 6% of loans to Hispanic white borrowers were higher-priced, in contrast to 3.4% for non-Hispanic whites.”

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