Using Home Mortgage Disclosure Act records, a study looked back 31 years. While lending to women improved, Blacks and Native Americans still face problems.

LOS ANGELES – In a comprehensive study of discrimination in the American mortgage market, FairPlay today released the State of Mortgage Fairness Report.

FairPlay says it studied more than 350 million mortgage applications from 1990 to 2021 through loan records obtained from federal public source data in the Home Mortgage Disclosure Act (HMDA). The data includes information on race, ethnicity and gender in mortgage applications.

To measure fairness, FairPlay used the industry standard metric Adverse Impact Ratio (AIR), which compares the rate of approval for protected status applicants compared to a control group (typically White or male applicants). For example, if protected class applicants had a 60% approval rate and the control group had a 90% approval rate, the AIR would be 60/90 or 67%.

An AIR of less than 80% is considered a statistically significant disparity, however, the results do not include information on risk, which also comes into play when lenders consider approving or declining loan applications.

Some good, some bad

First, the bad: Mortgage fairness for Black Americans is essentially no better today than it was thirty years ago – and for Native Americans, mortgage fairness declined more than 10%.

• Native American mortgage applicants: In 1990, Native American homebuyers had an AIR of 94.8%. By 2021, AIR for Native American mortgage application approvals dropped to 81.9%.

• Black mortgage applicants: In 1990, Black mortgage applicants obtained loan approvals at 78.4% the rate of white applicants. In 2019, the AIR remained unchanged, so lending neither improved nor grew worse. The study found a modest AIR increase in 2020 and 2021 for Black applicants at 84.4%, likely attributable to massive government stimulus and other support programs designed to stabilize the housing market during the COVID-19 pandemic.

  Black homebuyers endure deep and persistent disparities in loan approvals in five states (Louisiana, Mississippi, South Carolina, Alabama and Arkansas) regardless of the macroeconomic environment. In 2021, Black homebuyers in these states were approved at 69% of white mortgage applicants. On a positive note, mortgage fairness for Black women improved from 69.8% in 1990 to 86.3% in 2021.

• Female mortgage applicants: The most positive trend in the HMDA data relates to mortgage fairness for women. Between 1990 and 2021, the AIR for mortgage applications filed by women rose from 91.8% to 99.2%, which is nearly on par with the control group (men).

• Hispanic mortgage applicants: HMDA data on Hispanic applicants only dates back to 2008, so there is an incomplete picture for population fairness trends. Since 2008, Hispanic Americans have seen a steady increase in mortgage approval fairness, from 77.7% to 87.7%.

  Hispanic mortgage applicants, in contrast to Black applicants, tend to experience higher approval rates for mortgages in communities where they make up a larger percentage of the overall population.

• Asian mortgage applicants: For Asian homebuyers, the fairness story continues to remain positive. Asian Americans had fairness parity with white mortgage applicants in 1990, and have consistently maintained comparable levels of mortgage approvals to white applicants.

“Despite decades of government intervention and the growth of high-priced consultancies devoted to fair lending practices, there is clearly much work to be done,” says FairPlay CEO/founder and report co-author Kareem Saleh. “It’s time for policymakers, regulators and lending institutions to admit that our efforts to reduce bias in mortgage lending have not moved the needle. If we want to extend the American dream to historically underrepresented groups, we must start encouraging new approaches to lending fairness.”

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