Analysis: Black homebuyers more than twice as likely as whites to be denied mortgages

Black homebuyers in America are more than twice as likely to be denied a home mortgage as are white homebuyers, even when controlling for applicant incomes, according to a new analysis of data released by the federal government.

An analysis of data released by the Federal Financial Institution’s Examination Council released by Clever Real Estate this month found that 26 percent of African American applicants were denied home mortgages in 2016, the most recent year of data. Just 10 percent of white applicants were denied mortgages that year.

{mosads}When controlling for income levels, the study’s results held: among similar income-level applicants, 19 percent of African Americans were denied home mortgage applications while just 9 percent of white applicants were denied.

The study reviewed data from 1.7 million mortgage applications in 2016 and found that racial disparities were most noticeable in Southern states, while states in the western U.S. saw lower levels of racial disparities in mortgage approvals.

“Racial discrimination still exists in mortgage lending: African Americans are twice as likely to be denied a mortgage when controlling for income,” wrote the analysis’s author, Eylul Tekin. “Disparity between white and black mortgage approval rates is most pronounced in the South: 89 percent of white applicants are approved in Southern states, compared to 76 percent of black applicants when controlling for income.”

“African-American and Hispanic home buyers are respectively 105 percent and 78 percent more likely to use high-cost mortgages for home purchases, putting them at greater risk of foreclosure,” the analysis continued.

The greatest disparity was found in South Carolina, where before controlling for income levels, just 8 percent of white applicants were found to be denied mortgages compared to 49 percent of black applicants.

“There are only four states where white applicants are denied at a higher rate than African Americans: Montana, Idaho, Hawaii, and Vermont; and in these states the discrepancy between black and white approval rates is less than 7 percent,” Tukin wrote, adding: “However, in states like South Carolina, there’s a 42 percent discrepancy between black and white approval rates.”