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Study reveals alarming inequality trend for Black, Native American borrowers

A new FairPlay AI report found significant mortgage loan approval disparities among certain groups, especially when mortgage rates surge

Mortgage fairness for Black and Native Americans is no better today than it was 30 years ago, according to a new mortgage fairness report.

The report, issued by “fairness-as-a-service” solution firm FairPlay AI, was based on a study of more than 350 million mortgage applications from 1990 to 2021. The applications were obtained from public data in the Home Mortgage Disclosure Act (HDMA). 

Fairplay used the industry standard metric Adverse Impact Ratio (AIR), which compares the rate of approval for protected status applicants to a control group. For instance, if protected class applicants had a 60% approval rate and the control group had a 90% approval rate, the AIR would be 60/90, or 67%. An AIR of less than 80% is considered a statistically significant disparity.

According to the report, Native American mortgage applicants’ loan approvals dropped by more than 10 percentage points, to 81.9% in 2021 from 1990. 

AIR for Black homebuyers rose modestly to 84.4% in 2020 and 2021, up from 78.4% in 1990. This was “likely attributable to massive government stimulus and other support programs designed to stabilize the housing market during the COVID-19 pandemic,” according to the report. The ratio remained unchanged in 2019 compared to 29 years ago, the report showed.

“Despite decades of government intervention and the growth of high-priced consultancies devoted to fair lending practices, there is clearly much work to be done,” said FairPlay CEO and report co-author Kareem Saleh. 


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Black homebuyers endure deep and persistent disparities in loan approvals in five states, including California, Alabama and South Carolina, according to the report. In 2021, Black homebuyers in these states were approved at 69% of white mortgage applicants.

Mortgage fairness for rural Black populations had an AIR of 74% in 2021, lagging behind the fairness of the urban population, which had an AIR of 83% in 2021. 

Racial divide in mortgage acceptance among government-sponsored enterprises is a challenge that Fannie Mae and Freddie Mac face, the Federal Housing Finance Agency noted in a report on GSE fair lending in its inaugural report in July. 

The gap between mortgage acceptance rates for minority and white borrowers “remains persistent,” the report said, stating the acceptance rate for Black borrowers was nearly 68%, nearly 20% below the acceptance rate for white borrowers in the fourth quarter of 2021.  

However, during the same period, the share of Black and Latino borrowers in the enterprises’ mortgage loan portfolio slightly increased, with about 0.5 and 2 percentage points more Black and Latino applications, respectively.

The Urban Institute has been calling for the federal government to address the racial homeownership gap by “improving credit measurement and underwriting systems for evaluating access to the housing finance system,” as noted in a report explaining the Black-white homeownership gap.

The institute urged policymakers to look beyond credit scores and rely less on “blunt measures,” such as debt-to-income ratios, which tend to be “less predictive of default and more punitive to black borrowers and others with low incomes.”

Increasing the use of alternative types of credit information, such as rental payment history, including cash flow data to augment traditional credit history and scoring, was recommended to attract potential borrowers who have difficulty accessing loans from traditional sources.

Bias in lending is a challenge that the mortgage industry has been struggling with, as seen from a handful of suits. Appraisal firm 20/20 Valuations and appraiser and mortgage lender loanDepot were sued by a Maryland couple earlier this year who claimed their home was appraised at a far lower value than it was a few months later when they removed indications that a Black family lived there.

In July 2022, Movement Mortgage paid $75,000 to resolve allegations of racial discrimination against Black and Hispanic borrowers seeking mortgages in the Seattle-Tacoma area. Undercover testers from the National Community Reinvestment Coalition filed a complaint claiming that the South Carolina-based lender had significantly higher application withdrawals and lower approvals in majority-minority census tracts compared with majority White census tracts, which it said amounted to redlining.

On a positive note, mortgage fairness for Black women improved to 86.3% in 2021 from 69.8% in 1990. Hispanic Americans have seen a steady increase in mortgage approval fairness, increasing to 87.7% in 2021 from 77.7% in 2008. HDMA data on Hispanic applicants only dates back to 2008.

Asian Americans have consistently maintained comparable levels of mortgage approvals to White applicants since 1990, according to the report. 

Saleh urged policymakers, regulators and lending institutions to look into ways to encourage lending fairness.

“If we want to extend the American dream to historically underrepresented groups, we must start encouraging new approaches to lending fairness,” Saleh said.

Editor’s note: This story was updated on Wednesday, Nov. 30 at 3:33 p.m. EST to include more context on the challenges GSEs/the federal government face regarding fair lending practices.

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