Mortgage denial rate three times higher for blacks
Dennis Rodkin
Nearly a fourth of all African-American conventional mortgage applicants in the Chicago area were denied last year, a new report says, more than three times the denial for whites.
Last year, 24.7 percent of black applicants here were turned down, according to federal data compiled by online real estate marketplace Zillow. The denial rate was 7.6 percent for white Chicago-area applicants, the report said.
Hispanic applicants in the Chicago area were denied 18.6 percent of the time, and the rate for Asians was 10.7 percent.
The local denial rate has improved for black applicants, dropping from 28.6 percent in 2010. But the decrease was bigger nationally, with 22.4 percent of black applicants denied in 2015, down from 30.5 percent in 2010, the report said.
"Even though conditions have improved over the past few years, getting approved for a mortgage is still a significant barrier for some would-be buyers," Zillow's chief economist, Svenja Gudell, said in a statement.
The lag for Chicago blacks did not surprise experts in the field here.
"Ever since this kind of data has been collected, the denial rate for African-Americans has been worse than for any other group," said Kristin Faust, president of Neighborhood Housing Services, a housing advocacy and counseling group. A 2001 study found that mortgage applications by blacks in Chicago were five times as likely to be rejected as applications from whites were.
In the recession years of the mid-2000s, Faust said, "the bump hit working people and people of color harder, and they've been slower to rebound."
That shows up in part as lower credit scores, because of a prolonged period of unemployment, high medical costs or other reasons, according to both Faust and Spencer Cowan, a research consultant for the Woodstock Institute, a Chicago-based policy organization focused on lending and financial issues.
"People's credit histories were trashed by the recession," Cowan said, "and African-Americans are recovering from that more slowly."
Credit scores are a fundamental part of what lenders evaluate in determining whether to approve a mortgage application.
Cowan also said that because many Chicago neighborhoods and suburbs that are majority black have experienced the least recovery in home values since the crash, buyers in those neighborhoods may be getting rejected if the lender determines home values in the area don't support the appraisal of the home they're trying to buy.
Hispanics also made stronger gains nationally than in Chicago. The denial rate for Hispanic applications nationwide dropped 7.3 percentage points, from 25 percent in 2010 to 17.3 percent in 2015. In Chicago, the change was 6.5 percentage points, from 25.1 percent in 2010 to 18.6 percent in 2015.
"It's encouraging to see more black and Hispanic borrowers getting approved for mortgages," Gudell said, "but there's still a lot of progress that needs to be made."
Chicago's white and Asian denial rates were below the national averages in 2015. Nationwide, 8.7 percent of applications from whites were denied in 2015, and 11.1 percent of Asians.
The Zillow report did not include changes for white and Asian buyers nationwide between 2010 and 2015.
For all applications nationwide, 10.4 percent were denied in 2015, down from 14.2 percent in 2010. In Chicago, 9.7 percent of all applications were denied last year, down from 13.1 percent in 2010.