1996 HMDA shows high loan rejection rates for minorities

Data released by the Federal Financial Institutions Examination Council (FFIEC) on August3 showed that African-American mortgage loan applicants are turned away twice as often aswhite applicants. Although the numbers of rejections were up for both groups, the gulfbetween the percentage of African-Americans rejected and the percentage of whites rejectedhas continued to widen.

The FFIEC is a coordinating body for fivegovernment agencies. It has released Home Mortgage Disclosure Act (HMDA) data annuallysince 1990. The HMDA requires lenders to report demographic information about mortgageloan applicants and rejection rates. The 1996 data covered 14.8 million mortgageapplications at 9,300 lending institutions. Since 1990, that data has shown that minorityapplicants are generally turned away at a higher rate than white applicants.

Blacks, Hispanics, and Native Americans all had high rejection rateswhen applying for mortgages
The 1996 data released last month held no surprises for fair housing advocates. Nearlyhalf of all applications from African-Americans (48.8 percent) were denied by mortgagelenders in 1996. More than one-third of the applications from Hispanic applicants (34.4percent) were rejected. Native Americans had less than a 50 percent chance (50.2 percentrejected) of getting a home loan in 1996.

White and Asian applicants on the other hand, had much lower rejection rates. Whiteapplicants saw less than one-fourth (24.4 percent) of their applications denied and Asianshad a remarkable 13.8 percent rate of rejection. Rejection percentages have risen amongall of the groups along with debt levels and bankruptcies. The rate of rejection forAfrican-American applicants has risen more sharply than any other groups' rate, exceptNative Americans, whose rate has more than doubled since the collection of HMDA databegan.

In 1990, when HMDA data were first collected, African-American applicants were rejectedat a rate of 33.9 percent, 14.9 percent lower than in 1996. White applicants were rejectedat 14.4 percent, Hispanics at 21.4 percent, Asians at 12.9 percent, and Native Americansat 22.4 percent.

In an Associated Press report, Judith Knight, the housing and communitydevelopment director for the American Bankers Association, said that the higher rejectionlevels for African-American, Hispanic, and Native American applicants merely shows thatlenders are "working harder to solicit applications from minority applicants."Because there are more minority applicants being welcomed into the nation's banks, shecontends, there are more minority rejections.

Minority applicants with the same risk factors as whites are stillrejected more often
In the past when the HMDA data were released, lenders claimed that what looked likediscrimination really was not, because the data failed to take things like past creditproblems or indebtedness into account. According to this year's report, however, minorityapplicants in similar situations as whites were still rejected at higher rates.

For low-income applicants - those who earn less than 80 percent of their community'smedian income - white applicants were rejected at a rate of 32.1 percent.African-Americans were rejected at 44.5 percent and Hispanics were rejected at 37.5percent. Middle and upper class applicants - those earning more than 120 percent of themedian income - saw whites rejected at 8.6 percent, while African-Americans were rejectedat 20.4 percent and Hispanics received denials at 16.7 percent.

Allen Fishbein, an attorney with the Center for Community Change in Washington, told anAssociated Press reporter that some lenders are improving their lending programs to serveminority applicants, but others are making no progress at all. "The industry as awhole isn't doing as well opening up opportunities for minorities, African-Americans inparticular," he said. "Some individual lenders are carrying the industry as awhole on their backs and the industry as a whole isn't showing the types of gains that canbe made."

According to a statement released by the Office of the Comptroller of the Currency(OCC), the agency that regulates nationally-chartered banks, there is some good news inthe 1996 data. The number of loans to low-income households is increasing faster thanloans to middle or high income households. And, lending to African-Americans and Hispanicshas risen more than 50 percent in the past four years. The OCC also admitted that some ofthe data may point to problems that need to be analyzed further.