Despite growing homeownership rates among Black Americans, mortgage applications from Black borrowers are still getting denied at far higher rates than others.
Just shy of one-in-four mortgage applications from Black borrowers are denied, according to a Zillow analysis of 2023 Home Mortgage Disclosure Act data published Wednesday. That’s almost double the 12.6% denial rate for all applicants, and more than double the 10% of white applicants that are denied.
The most common reason given for turning down Black applicants was credit history, the report found. Orphe Divounguy, Zillow’s senior economist, said communities that were once barred from accessing credit continue to live in areas with little access to financial services and fewer opportunities to build credit.
“While discriminatory policies like redlining have long been outlawed, the damage from these historic practices is still felt today,” Divounguy said in a statement accompanying the report.
“That’s why it’s so important to expand credit access. Allowing rent payments to count in credit scores is one example of how to move the industry forward,” he added.
Almost 46% of Black households own their home — an increase from a low of 43% in 2019, but still down from a peak of almost 50% in 2004. Meanwhile, 74% of white households own their home.
Home buying is one of the largest investments people make in their lifetimes as a means to build wealth. According to Zillow, almost 40% of the $3 trillion wealth gap between Black and white families in the U.S. comes from disparities in homeownership and house values.
Homeownership in the U.S. has become increasingly difficult, particularly for younger Americans, as high mortgage rates, rising home prices, and low inventory squeeze the market.
Not an isolated case
A CNN analysis last December found that the Navy Federal Credit Union, the largest credit union in the country with more than 13 million members, approved more than three-quarters of white borrowers who applied for a new conventional home purchase mortgage in 2022. That compared with the less than 50% of Black borrowers the credit union approved for the same loan.
Even when controlling for other variables — like income, debt-to-income ratio, and property value — Black applicants were more than twice as likely to be denied as white applicants by Navy Federal, CNN found.
In response to the report, a coalition of Democratic lawmakers led by Sen. Sherrod Brown of Ohio called on the Department of Housing and Urban Development and the Consumer Financial Protection Bureau to investigate the racial disparities in mortgage approval rates.
“When denial rates for Black and Hispanic applicants at one institution appear to be drastically higher than the national average and higher than their rates for similarly situated white borrowers, it raises questions about whether its mortgage lending practices comply with federal fair housing and fair lending laws and regulations,” the senators wrote in January.
