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Report: Americans of Color Locked Out of Conventional Home Loans

It's estimated that more than 5 million potential borrowers are being locked out of home loans because of an over-correction after the foreclosure crisis. (Brandon Rivera/Flickr)
It's estimated that more than 5 million potential borrowers are being locked out of home loans because of an over-correction after the foreclosure crisis. (Brandon Rivera/Flickr)
October 6, 2017

FRANKFORT, Ky. – Achieving the American dream often comes down to access to capital, and a new report finds that racial disparities continue when that dream involves a home loan.

The Center for Responsible Lending analyzed 2016 mortgage-lending data and found African Americans and Hispanics received just nine percent of the country's conventional loans last year, while their white counterparts were approved for 70 percent of the loans granted.

Nikitra Bailey, executive vice president of the CRL, explains the impact it has on people as they try to advance themselves economically.

"We know that many creditworthy borrowers are in the marketplace," she says. "Many borrowers who have less than prime credit scores are still creditworthy and they perform well, particularly in a market where a lot of the bad practices have been addressed."

Consumers of color continue to depend on higher-cost, government-backed mortgages from the Veterans Administration and Federal Housing Authority. The Equal Credit Opportunity Act and Fair Housing Act protect people against discrimination because of race, but the CRL and others argue that standards are so tight following the foreclosure crisis, many creditworthy consumers are denied.

The Urban Institute estimates more than five-million potential borrowers are being locked out because of an over-correction after the foreclosure crisis. And African Americans' rates of home ownership are about the same as in 1968.

Bailey says the inability to purchase a home has far-reaching effects on people's lives.

"Homeownership is the cornerstone of how most American families have built their wealth over time," she explains. "The home equity is used to finance a business, to help send a child to college or to help one land into a safe and comfortable retirement."

Bailey and other market analysts say the future of the housing market depends on including under-served borrowers, as current homeowners need buyers when they want to sell. Harvard's Joint Center for Housing Studies found nonwhites accounted for 60 percent of household growth between 1995 and 2015, and predict that half of the millennial households by 2035 will be nonwhite.

Mary Kuhlman, Public News Service - KY