Lenders stopped literally drawing red lines around minority neighborhoods on maps, marking them as too risky for mortgages and harming the economic prospects of people of color while contributing to urban decay.
However, the recent housing crisis pointed to a different way in which minority borrowers have been hurt by the mortgage process.
“It’s pretty evident that people of color were being targeted” for risky mortgage loans during the housing bubble, according to Rolf Pendall, director of the Metropolitan Housing and Communities Policy Center at the Urban Institute.
When housing values declined, black and Hispanic communities were harder hit and sustained more foreclosures, according to Zillow Research.
It was a double-whammy for minorities when lenders tightened their lending standards as the recession took hold.
“We have completely overcorrected with fear of those borrowers who have pretty good but not perfect credit, and those tend to be disproportionately minorities, so this overcorrection disproportionately hurts them,” said Sheryl Pardo, the spokesperson for Urban's Housing Finance Policy Center.
The good news is that denial rates for conventional mortgages fell in 2014, particularly for black and Hispanic applicants, according to data recently released under the Home Mortgage Disclosure Act (HMDA).
That means it was easier for everyone to get a conventional home loan last year than it was in 2013, and black and Hispanic applicants bounced back stronger than others.
But they were coming from a place of far higher denial rates and still have a long way to go.
Last year, 23.5 percent of black applicants were turned down for conventional mortgages, compared to 18.8 percent of Hispanics, 12.2 percent of Asians and 9.4 percent of whites.
A host of factors, including the high denial rates, have led blacks to have a far lower rate of homeownership (41.2 percent) than whites (71 percent), Asians (57.5 percent) and Hispanics (45 percent).
Blacks’ wages have suffered since the dot-com bust, putting black homeowners in a particularly precarious position in the runup to the most recent recession, Pendall said.
“Black Americans had been uniquely hard hit among racial groups by the post-9/11 crash, so they were already financially struggling, and that’s part of why the mortgage crisis could hit them so hard,” Pendall said.
For more housing market data, check out Zillow Research.
Related:
- See Where Mortgage Denial Rates Are Highest and Lowest by Race
- Home Values in Black, Hispanic Neighborhoods Bouncing Back More Slowly
- Revisiting Mortgage Lending in Detroit: New Insights from Home Mortgage Disclosure Act Data
via Zillow Blog - Real Estate Market Stats, Celebrity Real Estate, and Zillow News http://ift.tt/1HEj7sN
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