WASHINGTON–Tightened underwriting standards since the housing crisis have led to decreased mortgage lending to African-Americans, according to a new report.
The report, conducted by the National Association of Real Estate Brokers (NAREB), a trade group of African-American real-estate agents and brokers that is based on Home Mortgage Disclosure Act data, found that African-American borrowers accounted for a smaller share of mortgage originations in 2014, at 5%, than in 2004 when they were 7%. By contrast, the report said, white borrowers accounted for 69% of mortgages in 2014 versus 58% one decade earlier.
In addition, NAREB said just 3% of Fannie Mae- and Freddie Mac-eligible mortgages went to black borrowers in 2014, down from 6% in 2004, according to the report.
The analysis said the declines are the result of tighter underwriting practices that followed in the wake of the housing crisis. It further said those same changes in standards have nearly wiped out subprime mortgages, which are typically taken out by borrowers with lower credit scores. Those loans “disproportionately went to black and Latino households,” said James Carr, a professor in Wayne State University’s Department of Urban Studies and Planning, who co-wrote the report for NAREB.
The NAREB report said that between 2004 and 2014 African-American borrowers’ applications for Fannie- and Freddie-eligible mortgages fell 82%. At the same time, African-American applications for government-backed mortgages—mostly those insured by the Federal Housing Administration—jumped 60%.
The report also suggests “outdated credit scores” are keeping African-American borrowers from getting mortgages, many of whom lost their homes to foreclosure or experienced negative credit events that continue to haunt them.