Racism in mortgage lending

[karinothing]

Apologies if this was discussed already. I don't necessarily find it surprising, but it is disappointing. The break down with other banks is interesting so there is clearly some policy at navy federal that is causing this since places like Bank of America don't have the same discrepancy. 

www.cnn.com/2023/12/14/business/navy-federal-credit-union-black-applicants-invs/index.html

"Navy Federal Credit Union, which lends to military servicemembers and veterans, approved more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, according to the most recent data available from the Consumer Financial Protection Bureau. But less than 50% of Black borrowers who applied for the same type of loan were approved.



While many banks also approved White applicants at higher rates than Black borrowers, the nearly 29-percentage-point gap in Navy Federal’s approval rates was the widest of any of the 50 lenders that originated the most mortgage loans last year.



The disparity remains even among White and Black applicants who had similar incomes and debt-to-income ratios. Notably, Navy Federal approved a slightly higher percentage of applications from White borrowers making less than $62,000 a year than it did of Black borrowers making $140,000 or more..."

[bee20]

I'm glad CNN is analyzing and publishing this. However, nowhere in the article did they mention why mortgage applications ask for race. Other discrimination paths exist but I don't remember checking off demographic information when I took out my mortgages.

[Susie]

This reminds me of the articles I've seen previously about home appraisals, where homes appraise materially higher with white people posing as the homeowners vs. black owners being present when the appraiser comes.  I can't say I'm surprised to see this in mortgages too, except maybe by exactly how stark the difference is.

Dec 19, 2023 14:56:57 GMT -5 bee20 said:

I'm glad CNN is analyzing and publishing this. However, nowhere in the article did they mention why mortgage applications ask for race. Other discrimination paths exist but I don't remember checking off demographic information when I took out my mortgages.

I don't remember indicating race on any of my mortgage applications either (most recently for a new house purchase in 2021), but some of the mortgages I've taken out in the past were with banks or credit unions where I was already a customer.  They might have demographic info on file.  Lenders might be able to gather it when applicants apply in person, or from documents such as copies of drivers' licenses or passports, birth certificates, etc.  I think there are plenty of opportunities for the info to sneak in, even not on an application form, unfortunately.

[twilightmv]

Dec 19, 2023 14:56:57 GMT -5 bee20 said:

I'm glad CNN is analyzing and publishing this. However, nowhere in the article did they mention why mortgage applications ask for race. Other discrimination paths exist but I don't remember checking off demographic information when I took out my mortgages.

They do ask. You can opt out of the disclosure, but they are required to give you the form. It’s intended to prevent redlining and discrimination in the industry. The underwriters don’t see this data however. DH is in the industry and his thoughts on the article is that the racism is systematic and indirect. Some of the things mentioned in the article- lower credit scores, less reserves, etc. Vs someone reading your race on a form and saying no. Bad systems.

[bee20]

twilightmv, thanks for clarifying. Clearly they had the data to write the report but, good to understand it would be blinded at the underwriter level.

The systematic part keeps showing up.

[Pibs]

And this is reminding me that we still need to get the racial covenants taken off of our home. I started when we first bought the house and nobody knew how to do it or walk me through it. Oregon passed a law this spring to make it easier.

[wanderingback]

Dec 19, 2023 14:56:57 GMT -5 bee20 said:

I'm glad CNN is analyzing and publishing this. However, nowhere in the article did they mention why mortgage applications ask for race. Other discrimination paths exist but I don't remember checking off demographic information when I took out my mortgages.

So when we were doing our mortgage paperwork it was half filled in by our mortgage broker and we had to review it and the mortgage broker had filled in white for me and my partner (we are both Black). I specifically did not correct it for fear of discrimination. We had only talked to him on the phone and I assume he assumed we were white.

When we showed up to the closing the look of shock on his face when we introduced ourselves is something I’ll never forget. Then, when we got to the page where white was marked he was like "oh oh someone in our office must’ve made a mistake" then had to go fix it.

So at least in my state with our mortgage there was absolutely a section that was to be filled out for race.

[aurora]

wanderingback, that's awful that you had that experience with your broker, if unfortunately not surprising.


To the OP, there are so many racial biases built into our subconsciouses and our systems. Discrimination follows from these even when people aren't making consciously racist decisions.

[al dente]

Navy Federal is absolutely awful to work with for getting a mortgage. Something also happened with ours after our pre approval through them like the article mentions. I forget what it was now, but I've heard it happen to many people who try and do a navy fed mortgage. Our realtor tried to steer us away from them due to seeing it happens so often.

I wonder what the rate is on VA loans because I would think most people going through Navy Federal are getting VA loans vs conventional like the article talks about.

[leahcar]

Mortgage lenders are required to ask you; you don't have to answer though. There's a federal requirement; that's how the government monitors for Fair Lending (ie- how you're supposed to protect against this kind of discrimination). The Home Mortgage Disclosure Act (HMDA) is the law that requires this. You can actually look up HMDA data for organizations if you really want to spiral.

[audette]

Dec 19, 2023 20:55:16 GMT -5 Pibs said:

And this is reminding me that we still need to get the racial covenants taken off of our home. I started when we first bought the house and nobody knew how to do it or walk me through it. Oregon passed a law this spring to make it easier.

Wait, what?!

_Racial_ covenants?


I mean, yay for working to remove them. The mind boggles that they are legal.

[Pibs]

Dec 22, 2023 18:12:01 GMT -5 audette said:

Dec 19, 2023 20:55:16 GMT -5 Pibs said:

And this is reminding me that we still need to get the racial covenants taken off of our home. I started when we first bought the house and nobody knew how to do it or walk me through it. Oregon passed a law this spring to make it easier.

Wait, what?!

_Racial_ covenants?


I mean, yay for working to remove them. The mind boggles that they are legal.

They're not! But just because they're illegal doesn't mean they language goes away. We have to go through the circuit court to have it removed. It's just so disgusting to even see it.

[audette]

Dec 22, 2023 20:15:52 GMT -5 Pibs said:

Dec 22, 2023 18:12:01 GMT -5 audette said:

Wait, what?!

_Racial_ covenants?


I mean, yay for working to remove them. The mind boggles that they are legal.

They're not! But just because they're illegal doesn't mean they language goes away. We have to go through the circuit court to have it removed. It's just so disgusting to even see it.

Dang. That sounds nuts. And even worse that it is a pain to remove them...