Whose American Dream? Seeking Mortgage Justice for Minorities

With falling housing prices and rising interest rates, it’s not an easy time to be a new homeowner in America. Yet the going is even tougher for minority households.

Despite overall mortgage fairness increasing in recent years, discrimination still occurs against historically disadvantaged groups, especially Black, Hispanic and Native Americans. 

FairPlay, the startup behind the world’s first Fairness-as-a-Service solution for countering algorithmic bias, released a report in December that analyzed publicly available data to identify the nation’s fairest cities and lenders. 

The results highlight the hurdles faced by each minority group. 

“Reservations” About Reservations

In 2021, Native American applicants were approved for mortgages at 81.9% the rate of White homebuyers. This group suffered especially low approval ratings in Arizona and New Mexico, the data showed. 

The Top 10 Fairest Cities for Native Americans include Miami, San Francisco, Seattle, Boston, Minneapolis, San Diego, Las Vegas, Detroit, Fort Worth, and Los Angeles. As for the Top 10 Fairest Lenders for Native Americans, they include Primary Residential Mortgage, Huntington National Bank, Paramount Residential Mortgage, Prosperity Home Mortgage, Home Point Financial, Union Home Mortgage, Lakeview Loan Servicing, Caliber Home Loans, Loandepot.com, and Cornerstone Home Lending.

Native American communities face unique hurdles in accessing credit.

“Affordability, availability, substandard housing – just everything about the housing market is terrible on reservations,” Darrell LaMere, a Billings-based loan officer, told the Public News Service. “Housing is in dire straits right now, on every reservation in Montana.”

The legal status of reservations can sometimes turn away potential lenders who are concerned about the difficulty of recovering losses in case of default. 

“We are considered sovereign countries,” he said, “and some banks are reluctant to invest on reservations simply because of the foreclosure issue.”

Black Loans Matter  

Black Americans also face a tough time getting equal access to mortgages. 

Whereas more than 74% of White households own their own home, only 45% of Black households have achieved the same. 

The Fair Housing Act, which made it illegal to discriminate based on race or religion in home sales and rentals, was introduced decades ago. Despite this legal protection, the gap between White and Black homeownership has increased since then. In 1970, soon after the Act was passed, there was a roughly 24% homeownership disparity between Black and White households. Today it has grown to 30%.

“Race and ethnicity should not be a factor in determining lending decisions,” Samuel Deane, a Black financial planner with Deane Financial Partners, told Business Insider. “Yet, even with similar creditworthiness, whether face to face or online, the Black community is unfairly being charged higher interest rates and refinance costs.”

In 2021, Black homebuyers were approved for mortgages at 84.4%, the rate of White homebuyers. Although it is still below parity, it represents the highest rate ever. Black homebuyers endure the lowest approval rates for mortgages in the South and the Midwest, as well as in rural areas.

The Top 10 Fairest Cities for Black Homebuyers include San Diego, Portland, Seattle, San Francisco, Tampa, Denver, Miami, New York, Minneapolis, and Phoenix. As for the Top 10 Fairest Lenders for Black Homebuyers, they were Gateway First Bank, Lakeview Loan Servicing, Planet Home Lending, Bank of America, Community Bank, Movement Mortgage, Rocket Mortgage, Nationstar Mortgage, Guild Mortgage, Primelending. 

Young and Hispanic

The Hispanic community faces a different set of circumstances. Though disadvantaged in some ways, they typically have youth on their side, which may enable them to get an extra leg up. 

“Hispanic buyers tend to trend younger and are more likely to be first-time buyers,” said Manny Garcia, a demographer at Zillow.” In every single county in the United States, there is at least one type of assistance program that first-time buyers can access.” 

In 2021, Hispanic mortgage applicants were approved at 88.7% the rate of their White peers. Hispanic homebuyers had the lowest mortgage rates in rural areas. The Top 10 Fairest Cities for Hispanic Homebuyers are Denver, Minneapolis, Seattle, Dallas, Portland, Chicago, San Diego, San Francisco, Washington, D.C., and Boston. The Top 10 Fairest Lenders for Hispanic Homebuyers are Lakeview Loan Servicing, Gateway First Bank, Huntington National Bank, Cardinal Financial, Homebridge Financial Services, Academy Mortgage, Loandepot.com, Guild Mortgage, Movement Mortgage, and CMG Mortgage. 

The Importance of Being “Mortgage Ready”

Regardless of your background, getting a home loan – especially your first mortgage – is no walk in the park. It always pays to do your homework and prepare well in advance. If you feel your chances of success may be jeopardized by discrimination, there are always ways to make it difficult for lenders to reject you. These include being “mortgage ready,” such as improving your credit score (ideally to 760 or above), lowering your debt-to-income ratio, and having plenty of cash reserves on hand. 

It will take more time to remove the barriers that exist to historically disadvantaged minorities. Knowing which locales and lenders are fairest can help people seek out support along this daunting process and pave the way for all Americans to enjoy the American dream of home ownership. 

Find a Financial Advisor

Do you have questions about your finances? An experienced financial advisor can help you can enjoy life more with less money stress. Get to know financial advisors by visiting Wealthtender’s free advisor directory.

Whether you’re looking for a specialist advisor who can work with you online or a nearby financial planner, you deserve to work with a professional who understands your unique circumstances.