Black Homebuyers’ Mortgage Applications: A Study on Elevated Denial Rates

The problem of racial disparities in housing continues to be a pressing issue in the United States. Black Americans are finding that they encounter substantial obstacles when attempting to become homeowners, and this often includes being denied mortgage applications at an alarming rate that surpasses that of the general population.

According to a comprehensive analysis conducted by LendingTree utilizing data from the 2022 Home Mortgage Disclosure Act (HMDA), it has been revealed that Black homebuyers are approximately 1.6 times more likely to be denied mortgages.

The study shows that the mortgage denial rate for Black homebuyers in the largest 50 U.S. metropolitan areas averages at 5.30 percentage points more than the denial rate for all mortgage borrowers. This raises important questions about the fairness and equality of the mortgage lending process.

Key Insights:

1. Disproportionate Denials: On a national scale, 14.44% of Black homebuyers are refused a mortgage. This contrasts sharply with the 9.14% denial rate for the overall population.
2. Regions with Largest Disparities: Buffalo, NY, Raleigh, NC, and Boston are the cities with the greatest percentage point differences in denial rates between Black borrowers and the general borrower population.
3. Highest and Lowest Denial Rates: Miami, Detroit, and New Orleans have the steepest denial rates for Black borrowers, whereas Salt Lake City, Kansas City, MO, and Minneapolis have the lowest.
4. General Trends Across Metros: In nearly all of the 50 largest metros, the denial rates for Black borrowers are above 10.00%, with Salt Lake City being the lone exception at 9.24%.
5. A Slight Improvement: From 2021 to 2022, there has been a decrease in the gap between denial rates for Black applicants and the overall population, moving from 5.59 percentage points to 5.30.

Detailed Analysis of Key Metros:

• The Cities with Largest Disparities: In Buffalo, NY, Raleigh, NC, and Boston, the denial rate for Black borrowers averages 8.89 percentage points higher than the overall mortgage denial rate. These cities show respective denial rates for Black borrowers at 18.43%, 15.89%, and 16.16%, figures that are disturbingly higher than most other large metros.
• Cities with Highest and Lowest Rates: The average denial rate for Black borrowers across Miami, Detroit, and New Orleans stands at a staggering 20.70%, over double the average denial rate of 10.19% across Salt Lake City, Kansas City, and Minneapolis.

Digging Deeper:

The factors behind these disproportionately high denial rates among Black homebuyers are multifaceted and challenging to pinpoint with precision. However, the persistence of these disparities indicates underlying systemic issues. Some contributing elements may include:

• Credit History and Income Inequalities: Often, these denials can be attributed to differences in credit history or income levels, reflecting broader economic disparities.
• Discrimination and Bias: Subtle and sometimes overt forms of discrimination may still exist within lending institutions, leading to these disparities.
• Economic and Educational Factors: Variances in education and economic opportunities may also play a role in these trends, highlighting the need for comprehensive solutions.

The LendingTree study sheds light on a troubling pattern of mortgage application denial for Black homebuyers. The figures demonstrate a clear need for continued scrutiny, transparent lending practices, and policies that ensure fair and equal treatment for all homebuyers. The insights garnered from this study should spur further investigation and action to rectify these disparities, promoting a more inclusive and just housing market. It is a matter that demands attention from policymakers, lending institutions, and society at large, as it affects not only the economic well-being of individual Black Americans but also the health and fairness of the entire American housing system.