Lawmakers and regulators call for further scrutiny of mortgage industry after markup investigation found disparities
On the heels of a major anti-redlining effort announced by the Biden administration this fall, lawmakers and regulators across the country are calling for further scrutiny, including some that represent areas with large lending disparities between white candidates and colored candidates.
“To address the lending rate gap, we must come up with legislative solutions to address these alarming disparities at city, state and federal government levels,” said Representative Ilhan Omar (D-MN) in a statement. “This gap exists because of the decades of racism and discrimination embedded in political decisions that fundamentally hurt people of color.”
His reaction came in response to Markup‘s recent survey, which found that people of color are much more likely to be denied a mortgage than white people with similar financial qualifications. Nationally, lenders were 80 percent more likely to turn down black applicants than white applicants of similar qualification, 70 percent more likely to turn down Native American applicants, 50 percent more likely to turn down Asian / Islander applicants from the Pacific and 40 percent more likely to turn down Latino applicants.
Markup also identified 89 metropolitan areas with strong lending disparities spanning almost every region of the country, from Nashville, Tenn., and Waco, Texas, to New York and Los Angeles. One of the worst was in the home state of Omar, Minnesota. Lenders were about 100 percent more likely to turn down black and Native American applicants in the Minneapolis metro area than white applicants there. Mortgage lenders were about 50 percent more likely to turn down Latino applicants and 70 percent more likely to turn down Asian / Pacific Island applicants. It was the only metropolitan area of Markupof the analysis where all four racial and ethnic groups were more likely to be denied home loans.
Minnesota Attorney General Keith Ellison said lenders need to review their lending standards and “can’t trust the algorithms and approval formulas they use.”
“It is clear that their criteria and policies, intentionally or not, lead to serious disparities in lending models,” he wrote in an email. âLenders who don’t shouldn’t be surprised if they come under investigation for violating federal and state laws, like the Fair Housing Act. “
The Richmond, Virginia metropolitan area had particularly high credit disparities for people of color. Black, Latino, and Asian / Pacific Islander applicants were all more than two and a half times more likely than white applicants to be denied a mortgage.
“It is appalling – but not surprising – that aspiring black and brown buyers are still haunted by the type of discriminatory housing practices that have prevailed in this country for decades,” said Senator Mark Warner (D-VA) in a statement.
Representative AndrÃ© Carson (D-IN) called Markupthe findings of “disheartening, but not surprising.”
âFor many years, systemic and coordinated efforts have been made to deny minorities home ownership and deny them this most essential American dream,â he said. “Today we need federal policies that not only hold discriminatory mortgage lenders accountable, but also reduce their incentive to engage in these practices in the first place.”
Industry representatives criticized at the time Markup, claiming that public data could not be used to draw conclusions because it did not include credit scores, which the government collects but is not public. The Mortgage Bankers Association and the American Bankers Association have also stated that the scope of MarkupThe analysis was too narrow and should have included government insured loans rather than focusing on conventional loans.
Over 160 media and publications broadcast Markupthe original story from, including The Associated Press, The Washington Post and Bloomberg. Several, including Post and courier, affiliated with NBC News 9News in Denver, and The Monks Register, used Markupthe conclusions and analysis of as the basis of their own stories.
The US Department of Justice, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency launched their Combating Redlining Initiative in October, citing Markupdiscoveries in their ad.
This new initiative is in stark contrast to the way the previous administration handled redlining cases. The number of such cases referred to the Department of Justice has dropped sharply since 2010, from around 25 cases that year to fewer than 10 cases in 2019.
In a hearing inaugurating CFPB Director Rohit Chopra, Senator Sherrod Brown (D-OH), who chairs the Senate Banking Committee, said algorithmic bias “risks reintegrating Jim Crow in a new form of high technology”.
“Bias in technology and algorithms are the most recent manifestation of discrimination in housing,” he said in a statement to Markup. âRegulators and Congress must ensure that our fair housing and loan laws are fully enforced to eliminate discrimination in all its forms. ”
In Brown’s original state, Markup Found, black, Latino, and Asian / Pacific Islander applicants in the Cincinnati metro area were all at least 100 percent more likely to be rejected than white applicants.
Fannie mae and Freddie mac, two quasi-government agencies that buy half of the nation’s mortgages, announced changes to their underwriting software this year after we reached out to them and asked about their algorithms. They will both begin to incorporate on-time rent payments into their algorithms to allow more people to qualify for homeownership.
Michele Rayner, representative for the Democratic State of Florida, said the issue was a “huge priority” for her. She instructed her staff to contact several of the companies mentioned in Markup‘s survey of how they do business in Florida. She sits on the State House’s Banking and Insurance Legislative Subcommittee.
âFor me, this question just goes to the heart of self-determination,â Rayner said. “You deny people who would otherwise qualify an algorithm-based home in one way or another.”
Florida had the most metropolitan areas (nine) with statistically significant differences in mortgage loans given to white applicants compared to applicants of color. California had eight, the second largest.
California Attorney General Rob Bonta recently said the Housing Strike Force of the California Department of Justice and the new Racial Justice Bureau would deal with housing issues, including looking at “mortgage service issues.”
Nina Sheridan, press secretary for the California attorney general’s office, declined to comment on specific execution measures, saying, “In terms of potential future actions, stay tuned!”
This article was originally posted on The Markup and was reissued under the Creative Commons Attribution-No Commercial Use-No Derivatives Licence.