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Racial Disparities

ACORN releases lending study

October 11, 2002

By MortgageDaily.com staff

In its annual Great Divide 2002 analysis, the Association of Community Organizations for Reform Now (ACORN) found that minority applicants for conventional loans were rejected significantly more often than whites in 2001, but found both increases and decreases in rejection overall since 2000.

The purpose of the yearly analysis, which began in 1990, is to gauge racial and economic disparities in home mortgage lending nationally and in 68 metropolitan areas. The report analyzes data released by the Federal Financial Institutions Examination Council about the lending activity of more than 7,800 institutions covered by the Home Mortgage Disclosure Act, according to the report.

This year's analysis found that 20.3% fewer blacks were denied loans in 2001 than in 2000. About 40% of black applicants were denied loans in 2001, down from almost half of black applicants being denied in 2000.

However, the disparity between loan approval for blacks and whites grew during that time. Blacks were denied 2.31 times more frequently than whites in 2001, compared with 2.07 times more frequently than whites in 2000, and 2.02 times more frequently than whites in 1996.

The figures for Latino applicant rejection rode in the middle during 2001. Just more than 26% of Latino applicants were denied a home mortgage loan during that year, down from almost 35% in 2000, and 38% in 1996.

In comparison, about 17.2% of whites were turned down for a home mortgage loan in 2001, down from 24.15% in 2000, and 25.94% in 1996, the report said.

The study for 2001 found again that minorities were more likely to be denied for loans than whites even when controlling for income, and that disparity increased the higher the economic level grew. Minorities with higher incomes were denied loans more often than whites with lower incomes in 2001.

A comparison of the same economic levels showed that low-income blacks were 1.5 times more likely to be turned down than low-income whites, moderate income blacks were 1.94 times more likely to be turned down than moderate-income whites, and upper income blacks were 2.94 times more likely to be turned down than upper income whites, the report said.

Low-income Latinos were denied only somewhat more often -- 1.18 times -- than low-income whites. Moderate income Latinos were 1.51 times as likely to be denied as moderate-income whites, and upper-income Latinos were denied 2.07 times as often as upper-income white borrowers.

The number of conventional purchase loans made to blacks shrank from 2000 to 2001, while the number of conventional loans made to whites remained roughly the same, and the number of conventional loans made to Latinos increased during this period, the analysis found.

Over the five years from 1996 to 2001, the number of conventional purchase loans made to all groups increased, with the greatest increase being in lending to Latino borrowers. The percentage increase to black borrowers also was greater than that to white borrowers, although more conventional purchase loans originated to minority borrowers came from subprime lenders.

"We must learn from the positive steps that have increased originations to Latinos and multiply those efforts many-fold in making credit available on fair terms to borrowers of all races and incomes," said ACORN national president Maude Hurd.

Another finding in the analysis showed that while the number of conventional loan applications from borrowers of all races decreased from 2000 to 2001, the drop in applications from blacks was the largest. Over the period of 1996 to 2001, applications from white and black borrowers dropped slightly while Latino applications grew by more than 50%.

In addition to analysis findings, ACORN includes recommendations to Congress in the report. The complete report was made available to the public on Oct. 1.

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