What is the mortgage industry to make of a new analysis that shows more Black and Latino homebuyers received loans than ever before in 2020, but racial disparities in who gets financed persist? 

Unfortunately, the Consumer Financial Protection Bureau isn’t making it any easier to answer that question. 

As Diane McLaughlin covers in her story in this week’s issue on a new analysis of Home Mortgage Disclosure Act data by the UMass Donahue Institute and the Massachusetts Community and Banking Council, the sudden drop in mortgage interest rates at the start of the pandemic gave a tremendous boost to minority homebuyers. Typically, these buyers – who are often first-time buyers and frequently make less or have less savings than white first-time buyers – struggled to land houses and condominiums in Massachusetts thanks to our high housing costs.  

But while Black and Latino buyers’ shares of the loans made in 2020 exceeded those in previous years, they didn’t come close to matching either demographic’s share of Massachusetts’ population – let alone regions of the state where those shares are larger – or rates that would begin to repair decades of economic injustices forced on these communities by largely white politicians and business leaders in decades past. 

To top it off, denial rates for Black, Latino and Asian borrowers were higher than those for white borrowers, even when high-income buyers making down payments of at least 20 percent were isolated from other less-qualified loan applicants. 

The lending industry is full of workers and executives who know this is a problem and want to work with advocates and communities to find a solution. But the CFPB’s heretofore unwillingness to release HMDA credit score data stands in the way.  

Without this key data set, a huge question mark hangs over just where efforts should be focused to fix these lending disparities. Is it structural racism, in the form of a flawed credit score system that penalizes people for being poor and working-class? Is it animus on the part of some lenders’ staff? Or something else entirely? 

Just as importantly, the CFPB is also causing damage to the entire mortgage industry’s reputation by keeping this data under wraps. Otherwise, Americans are likely to assume many institutions harbor racist views – a not unreasonable conclusion given this country’s track record and current events. 

It must be said there are very important privacy concerns that prevent the CFPB from simply making HMDA credit score data available to the general public. And the bureau’s willingness to release the data to researchers at the Federal Reserve Bank of Minneapolis is a good sign.  

But the agency should also seek independent voices who could partner with unimpeachable entities like regional Federal Reserve banks to dig into the information.  

To sit on the information instead would be a disservice to us all. 

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CFPB Not Helping Lending Disparity Fixes

by Banker & Tradesman time to read: 2 min
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