When more than green matters

Disparities in loan denials in N.E.While the denial rates for home loan applications (both for purchase and refinancing) decline as household income increases, the changes vary dramatically across racial/ethnic groups. / Note: Demographic groups refer to
Disparities in loan denials in N.E.While the denial rates for home loan applications (both for purchase and refinancing) decline as household income increases, the changes vary dramatically across racial/ethnic groups. / Note: Demographic groups refer to "nonLatino white," "nonLatino black" and "nonLatino Asian."Source: Federal Reserve Bank of Boston

It just makes sense that the more money you make, the less often your home loan application will be rejected. And yet …

Data for New England compiled by the Federal Reserve Bank of Boston (thanks to the Home Mortgage Disclosure Act) for applications for both home purchase and refinancing loans shows declining denial rates as household income levels increase. But further parsing of the numbers from 2013, the most recent year available, reveals significant differences in denial rates when race is taken into account.

For instance, when yearly household income ranges from $1,000 to $30,000, non-Latino whites experienced a 35.1 percent denial rate, while non-Latino blacks, non-Latino Asians and Latinos had 43 percent, 39.9 percent and 37.5 percent denial rates, respectively.

When the income range moved up to $71,000 to $90,000, the denials rates declined, but not the same across the board. Whites experienced a 13.5 percent denial rate, while blacks, Asians and Latinos had denial rates of 23.7 percent, 13.4 percent and 19.7 percent, respectively.

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The largest disparity in rejection rates occurs in the highest income level, those households earning more than $150,000 per year. The lowest denial rate was for Asians, at 7.2 percent, followed by whites, with 9.2 percent, then Latinos at 13.1 percent and blacks at 17.8 percent.

The denial rate movement for two of the four ethnic groups merits attention. The first group is non-Latino Asians, who went from the second-highest denial rate for the lowest income group to the lowest for the highest income group.

At the other end of the spectrum, non-Latino blacks had a denial rate in the lowest income category that was 22.5 percent greater than the benchmark white number (whites totaled more than eight times as many home loan applications than the other three ethnic groups in New England combined).

By the time the highest income group was reached, that disparity had grown to 93.5 percent. Even more stark was the difference between blacks and Asians, with the difference between the two groups’ denial rates growing from 7.8 percent at the lowest income level to 147 percent at the highest.

The Boston Fed did not provide analysis of these numbers, but they would seem on their face to be cause for more than a little head scratching. •

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