June 24, 2021

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Mortgage News

Biden focused on ‘huge divide’ in mortgage lending disparity

Recently released credit data shows improvements in the Charlotte real estate market. A senior HUD advisor told WCNC Charlotte “the will is there” to fill the void.

CHARLOTTE, NC – Most of Charlotte’s largest lenders cut their mortgage denial rates in 2020, according to a WCNC Charlotte analysis re-released Mortgage Disclosure Act data. However, the data shows that these lenders still turned down black applicants twice as often as their white counterparts over the past year.

A senior adviser to the new Secretary of the United States Department of Housing and Urban Development told WCNC Charlotte that the void was “a priority” for the Biden administration.

“I think some of the real work is here and this president made a commitment,” said HUD Housing Finance Senior Advisor Alanna McCargo said. “The data shows us that there is still a huge gap when you look at mortgage lending on a racial basis, and it has stayed that way, and it is bigger today than it is in our history when we look at that data.”

Why it matters

Homeownership is widely recognized as one of the most important avenues to wealth.

One recently Study by the Urban Institute reported in 2018 that the black and white home ownership gap “reached 30.5 percentage points, the highest level in 50 years and an increase of 4.1 percentage points since 1960”. Additionally, the study found that it took more than a decade for black home ownership to recover from the decline after the 2008 collapse.

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The economic struggles for some families caused by the pandemic could make the problem worse.

“Keeping people in their homes is also a really big part of closing the gap,” McCargo said.

The largest lenders in Charlotte were two to three times more likely to turn down black applicants than white ones in 2018-2019

WCNC Charlottes comprehensive investigation Much higher mortgage denial rates for black applicants were noted in the problem earlier this year. The data showed that lenders turned down black applicants two to three times more often than white applicants.

These lenders cited poor credit histories and higher debt-to-income ratios, as well as systemic racial barriers, as the main reasons for rejections.

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“We’re talking about generations that have brought us where we are,” said McCargo. “It will take some time to get it out, but I’ll say the will is there.”

The latest data, analyzed by WCNC Charlotte, shows that most of Charlotte’s largest lenders closed the void in 2020, but nowhere near enough.

“Don’t try to do this alone”

Local school teacher Sadia Vanager recently bought her first home, but it took years of preparation before then.

“I wanted to have a home when I was 35 and I’m 35, so I made it,” says the mother of three with a smile. “It’s very important to teach my kids this. I don’t want it to be like, ‘Mom just lets these things happen.’ You have to know that things take hard work. You have to be a steward of your money and a steward of your credit. It can definitely be done, but you have to work for it too. “

If Vanager learned anything in the process, it is that you need help from others. She has received advice from her agent on building good credit and managing money, help with securing the down payment, and guidance.

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“I didn’t know anything about the process,” she said. “Don’t try to do this on your own. It’s not easy, but if you have the right people in your corner it can be done.”

Fundamental changes along the way

President Joe Biden announced his plan to tackle racial discrimination and bias in the housing market on June 1st.

McCargo said the fact that the Biden administration recognizes the problem and role of the federal government in these inequalities is a breakthrough. She hopes the federal government can make the most of this moment and improve some of the efforts made by organizations and banks.

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“You see the will and the work to really make some fundamental changes,” she said. “The HUD has been deeply committed to this work since day one of this government. I feel like the stars have teamed up and we have a president and a HUD secretary and just a government that recognizes this and is really ready to work on it with that focus much faster than usual. “

McCargo said HUD is reviewing its programs and policies to identify problems and find solutions, focusing on everything from risk assessment technology to reassessing the industry’s perspective on specific populations.

“The differences you point out are really ingrained in the systems that really support the mortgage and underwriting process,” McCargo told WCNC Charlotte. “The industry is largely based on automation. We see deep disparities resulting from these algorithmic formulas.”

CONNECTED: The largest lenders are up to three times more likely to deny home loans to black applicants than whites

HMDA data shows that black borrowers who have secured loans through the largest Charlotte marketplace lenders pay slightly more interest on average, the equivalent of $ 471 over the life of a 30-year mortgage of $ 250,000. One recently Study by the Federal Association of Real Estate Agents found that black homeowners pay even more interest payments of $ 743 annually, largely due to perceived risk factors.

“We have to level the playing field,” said McCargo. “That shouldn’t be the case. It shouldn’t cost more because you’re black to buy a house.”

Congress is watching

The House Financial Services Committee has taken note of the issue. Rep. Alma Adams (D), NC District 12, briefed fellow committee members on the results of WCNC Charlotte during a March hearing on the matter and entered WCNC Charlotte’s reporting in minutes.

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“We have to put more pressure on,” said Rep. Adams. “We’re in, we know it exists, and we’re going to try and do a few things to fix it.”

Build generational wealth

Back in Sadia Vanager’s new home, she benefits from the efforts of an earlier generation. Her grandmother, a Jamaican immigrant, shared her first home with Vanager. She also helped raise her children. The selfless love of Vanager’s role model contributes to the building of generational wealth today.

“If someone later wants to own this house, it will always be here. When I’m grandma, my grandchildren can play in the garden,” said Vanager. “It’s really important that maybe one day I can even take care of her and bring her back to my home and return the favor she has given me.”