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Black, Hispanic, and Asian home buyers continued to be denied mortgages more often while Philly’s housing market boomed

Racial disparities in mortgage denial rates persisted in 2021 regardless of home buyers’ income and other financial qualifications.

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During the red-hot housing market of 2021, Black, Hispanic, and Asian aspiring homeowners in Philadelphia continued to be denied mortgages more often than white borrowers regardless of income and other financial qualifications, according to an analysis of the latest federal mortgage data.

Researchers at Reinvestment Fund, the Philadelphia-based community investment nonprofit, found that while the overall mortgage market in the city stayed strong in the first full year of the pandemic, racial disparities in access to mortgage credit, types of mortgages, and characteristics of loans remained.

The latest findings “provide yet another reminder of persistent patterns of inequitable access to mortgage credit for Black and brown borrowers and communities across the city,” researchers wrote in a report published in October.

There was a little progress toward racial equity in 2021, but going forward, inflation, higher interest rates and home prices, and competition from investors “will likely exacerbate many of the disparities,” the report said.

The share of Black mortgage applicants denied loans in Philadelphia has decreased over the last five years from almost 20% in 2017 for loans not backed by the government to 12.5% in 2021, according to the report. But over that same period, denial rates for white applicants in Philadelphia were almost 7% in 2017 and about 6% in 2021.

» READ MORE: Gaps in Black and white home ownership transcend a booming market and threaten to leave some behind

Black borrowers were less likely to be denied for a loan in Philadelphia in 2021 than nationwide. The denial rate nationally was almost 16%, compared to 12.5% in the city.

Denial rates for Hispanic borrowers in Philadelphia increased between 2020 and 2021 from about 9% to 10%. It’s a reversal of a downward trend.

Denial rates for white applicants are “substantially” lower than denial rates for Black, Asian, and Hispanic applicants no matter how much money they make, according to the analysis.

Black applicants with incomes over $57,000 in 2021 were denied mortgages more frequently than white applicants with incomes under $57,000. And a much higher percentage of Black borrowers considered well-qualified by industry standards were denied loans than white borrowers who were less qualified.

» READ MORE: It’s no easier for Black Philadelphians to become homeowners now than it was 30 years ago

In Philadelphia, the highest denial rates are concentrated in North Philadelphia and much of West and Southwest Philadelphia in communities with majority Black or large Hispanic populations.

Many places where aspiring homeowners have most frequently been denied loans are where investors have been buying up homes with cash. This makes home ownership for people of color and low-income residents even more difficult, Ira Goldstein, president of policy solutions at Reinvestment Fund, said in an interview.

Among applicants who got mortgages, data suggest white borrowers have more buying power than Black, Hispanic, and Asian borrowers, who used nongovernment-backed, or conventional, loans to purchase homes with lower incomes, property values, and loan amounts, according to Reinvestment Fund.

Black and Hispanic borrowers with conventional loans had higher loan-to-value ratios, which compare the loan amount to a property’s appraised value. This means these borrowers put down less money and took on more debt to purchase. So lenders considered their loans riskier and most likely charged higher interest rates. These borrowers also had higher debt-to-income ratios, meaning they spent higher shares of their monthly income on debt.

Overall, Black and Hispanic borrowers had a harder time qualifying for mortgages. But again, even when Black and white borrowers have the same qualifications, Black borrowers are at a disadvantage, according to the report.

» READ MORE: Black home buyers face barriers from past racist policies and current practices

Researchers examined Home Mortgage Disclosure Act data collected from financial institutions and released annually by the federal government to paint a picture of mortgage lending in the country. The findings are used to determine whether lenders are meeting their communities’ needs and whether lenders are engaging in discriminatory lending practices.