Mortgage Denial Rates Drop, But Racial Disparities Persist; Sacramento-area Bucks National Trends

April 20, 2018 |  

In a signal of the continuity of the current economic expansion, the national mortgage denial rate has dropped to 9.5-percent, its lowest level in 20 years. The information showing the decline is from data contained in the Home Mortgage Disclosure Act (HMDA) and reflects applications for conventional mortgages.

While the information is welcome news, particularly to buyers and homebuilders, the report also revealed stark differences between racial groups in the country. As has been the case for several years, denial rates for black and Hispanic applicants outpace those for whites and Asians.

In 2016, denial rates for black and Hispanic borrowers were15.5 and 20.9 percent respectively, while white and Asian applicants denials were 8.1 and 10.9 percent respectively. For all groups, the denial rates are off the highs experienced in 2007.

In 2007, 34.3 percent of black applicants and 30 percent of Hispanic applicants were denied for mortgages. White and Asian borrowers were denied 12.7 percent and 16.2 percent of the time, respectively. 

While the denial rates nationally showed significant gaps, the picture in the greater Sacramento region was more equitable.  The overall denial rate in Sacramento for blacks was 9.1-percent. 

Bucking national trends, the highest denial rate in Sacramento was experienced by Asian borrowers who saw 12.7-percent of mortgages applications denied. Hispanic applicants saw 12.4-percent denied a loan; blacks and whites were 10.2 and 7.8-percent respectively.

Obviously, the inability to obtain a loan results in lower homeownership, particularly for blacks, who also say accessing mortgages is also an obstacle. For many Americans, homeownership has been and continues to be the keystone to the accumulation of intergenerational wealth.

"Mortgage approval data point to both progress and stubborn inequities in the American housing market," Zillow® Senior Economist Aaron Terrazas said. "By some measures, the gap in mortgage approval rates between whites and blacks is as narrow as it has ever been. However, black mortgage applicants are still more than twice as likely as whites to be denied, a visible legacy of historical discriminatory policies. For the large majority of home buyers, getting approved for a loan is the first step on the road to homeownership, and these continued disparities represent an ongoing barrier to housing and social equity in America."

For more information on how past federal government lending and real estate practices led to wealth disparities, listen to this interview on NPR's Fresh Air program posted below with author Richard Rothstein on his book The Color of Law.