A new analysis of Home Mortgage Disclosure Act data from Zillow found that Black borrowers were denied mortgage loans at a far higher rate than white borrowers in 2019.
More than one-third of Black borrowers who were denied were turned down because of their credit history.
“At a time when racism is at the front of many Americans’ minds, the disparity in mortgage rate denials is yet another reminder that the housing market – and country – have not done enough to address inequities and heal the scars from an unjust past,” Zillow economist Joshua Clark said in a release accompanying the findings. “The mortgage approval process is rooted in a racially unjust history that persists to make homeownership a far more difficult dream to achieve for many Black Americans. Owning a home is a major way to generate, keep and pass down wealth, and unequal access to mortgages only serves to further entrench inequality.”
The Zillow analysis found that Black applicants were denied at a rate 80 percent higher than whites, and 120 percent more when applying for a conventional loan.
The release stated that credit reporting and scores have a long history of disadvantaging people of color, who are more likely to be victims of predatory lending or not have a credit history at all. Because the mortgage industry relies heavily on an applicant’s credit history, the current system tends to prevent minority populations from building wealth through homeownership.
With this in mind, Zillow stated, it comes as no surprise that 59 percent of Black homebuyers are concerned about qualifying for a mortgage, compared with 46 percent of white buyers.
The report found that the Black homeownership rate is at its highest mark since 2012, 44 percent, although that lags behind the overall homeownership rate of 65.3 percent.
The analysis found that Black applicants (and all other applicants) are more likely to be denied a mortgage when they live in predominantly Black areas. Those denials trend higher in ZIP codes with a higher share of Black residents, which Zillow stated indicated that redlining still was visible in today’s housing market.
Zillow’s 2019 Consumer Housing Trends Report revealed that Black homebuyers were 15 percentage points less likely than white buyers to end up buying within their initial desired area. Nearly one-third of Black buyers who stayed within their original budget ended up farther from school and work, compared with 13 percent of white buyers.
Values of homes owned by Black people also were found to be significantly behind the overall market. Zillow said their value typically was 17.6 percent less than the overall home value of $218,2034.