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Fannie Mae denies black borrowers are disproportionately refused

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Mortgage Professional America | 27 May 2014, 07:16 AM Agree 0
A leading industry group is saying that black borrowers face a disproportionate denial rate on Fannie Mae- and Freddie Mac-eligible mortgages, but Fannie Mae says it sees “serious flaws” in that conclusion
  • Steven | | 27 May 2014, 09:05 AM Agree 0
    Of course people of different national origin will have different approval ratings. Approvals are not based on the color of skin. They are based on income and assets. The race baiters are getting real old real fast.
  • Eric T | | 27 May 2014, 09:13 AM Agree 0
    When it is in the government's best interest to claim race discrimination, they do so, but when "their" organization is attacked suddenly there is no discrimination.

    Mortgage decisions are based on income and credit. I would say race discrimination in lending is close to nil. Everyone just wants to make money.

    Blacks have lower income and lower credit on average, thus less approvals.
  • Theresa | | 27 May 2014, 09:19 AM Agree 0
    Eric T, that was a pretty crude statement "Blacks have lower income and lower credit on average". I do agree that their is basically little discrepancy in the LP findings or DU findings, based on race. It's a compilation of data and not skin color.
  • | | 27 May 2014, 09:22 AM Agree 0
    Requiring LOs to ask, or even worse, guess, at how people identify themselves ethnically constitutes a Hostile Workplace Practice, and it would not be tolerated in any other employment situation. "Hi I'd like to apply for this job you have posted!" "Thanks for applying! What race are you? Here are your 5 choices. And are you Hispanic or non-Hispanic?"
  • | | 27 May 2014, 09:43 AM Agree 0
    If you are raised within an environment where home ownership is not in abundance then those are the figures behind it.
  • William M | | 27 May 2014, 09:51 AM Agree 0
    This same claim was raised 20 years ago. Yes, on raw HMDA numbers, blacks were/are denied at a higher percentage. However, the followup, more comprehensive analysis that controlled for credit dti, etc. found that denials were remarkably consistent. I have no reason to believe that the result would be any different today. Sadly, many of the negative influences are a legacy of past discrimination that -thankfully- is fading.
  • mmt110 | | 27 May 2014, 10:00 AM Agree 0
    Where are these applications being taken? Mega-bank retail lender, or broker (MBA stat should not at all equate to broker)? Mega-bank retail lenders have a numbers game mentality - per one of their mortgage processors, only 30% of the mortgages in his pipeline will close. Why is that? How does it make sense waste time/money/resources to only close 30% of the mortgages you originate? Personally, I don't have time as a broker to send a mortgage for underwriting that has no chance of approval. I pre-underwrite and help choose the mortgage program based on the specifics of that mortgage file. That choice facilitation has no bearing on race, ethnicity, age, or gender, but it does have a bearing on credit scores, debt ratios, DU/LP finding, and cash reserves. How many of those were HARP mortgages that didn't pass the sniff test for some reason other than the LO didn't know what the heck they were doing? Call it what you want, but it has to boil down to the origination process. Most often on refinances, an appraisal short of estimates (either borrower or LO guess) can kill a deal (that's why I do so much legwork on potential appraisal value to ensure a fair value guess before I take a refinance application - and the borrower knows the alternative options should the guess not hold).
  • TK | | 27 May 2014, 10:05 AM Agree 0
    Disparate Impact anyone?
  • Jim Whitehead | | 27 May 2014, 10:25 AM Agree 0
    Hmmm, is the complaint that Fannie and Freddie's AUTOMATED UNDERWRITING takes race into account when approving or referring a mortgage?! Really?!!!
    That would certainly be race discrimination, but race is certainly NOT part of the automated underwriting evaluation.
  • money Matters | | 27 May 2014, 10:45 AM Agree 0
    The real question is not a race issue it is credit risk based on historical data from the credit reports. In addition to that one must also consider liquid reserves that a person has available. 2 many people have little to no reserves and therefor have to use a different mortgage product.
    Do we really want to go back to the policy of everyone deserves a home and then be in the same mess we are digging out of now. Oh last thing has anyone looked at the fines these banks have occured due to the Federal Goverment and its wonderful ways of doing business.
    How many people really understand the complexity of the dynamics that Frank Dodd has put on the banks? Certainly not our lawmakers!
  • Color Blind Mortgage Lender | | 27 May 2014, 10:59 AM Agree 0
    there was nothing crude about "Blacks have lower income and lower credit on average". This is the most likely cause of the disparate results. I have been a mortgage officer for over 20 years and my experience has been 1) that the primary reason EVERYONE is denied is due to credit score and 2) That Blacks and Hispanics GENERALLY have lower scores than Whites and Asians. This is MY experience in my little spot of the lending world and may not be reflective of the whole mortgage universe.

    However, we shouldn't have to guess here or make assumptions. HMDA collects the reason for the denials as well as the credit scores , ratios etc. so anytime denial figures are released it should also include the full story and not just the headline stuff that causes outrage. We all should be outraged that this statistic is nothing new and nothing will change until they also disseminate the WHY of the denials so we can address the reason.

    Give us ALL the info so we can fix the root causes.
  • Color Blind Mortgage Lender | | 27 May 2014, 10:59 AM Agree 0
    there was nothing crude about "Blacks have lower income and lower credit on average". This is the most likely cause of the disparate results. I have been a mortgage officer for over 20 years and my experience has been 1) that the primary reason EVERYONE is denied is due to credit score and 2) That Blacks and Hispanics GENERALLY have lower scores than Whites and Asians. This is MY experience in my little spot of the lending world and may not be reflective of the whole mortgage universe.

    However, we shouldn't have to guess here or make assumptions. HMDA collects the reason for the denials as well as the credit scores , ratios etc. so anytime denial figures are released it should also include the full story and not just the headline stuff that causes outrage. We all should be outraged that this statistic is nothing new and nothing will change until they also disseminate the WHY of the denials so we can address the reason.

    Give us ALL the info so we can fix the root causes.
  • loan officer | | 27 May 2014, 11:03 AM Agree 0
    I think we shouldn't ask for ones race or ethnicity on the application. Its just another way to segregate us. This article to me just shows to how pathetic some people are when they are trying to voice an opinion for their own agenda. There are more serious social issues out there for minorities. Calling LP and DU racist is the stupidest thing I have read and after reading this article I'm a little dumber.
  • | | 27 May 2014, 02:41 PM Agree 0
    Get over the black - white issue! If you ever did a mortgage you would realize it doesn't frkn matter what color you are. It only matters what you make, what your monthly debt is, what your fico scores are, and how much assets you have. And then you actually have to be able to qualify for the mortgage you are requesting. In case you don't know what that means--it means that you can actually pay for it --instead of getting the government to pay for it. Nothing else matters. I am so tired of the race issue the frkn democrats want to push down everyone's throat so they can get the ignorant masses to keep them in office.

    Oh and by the way once all the pertinent information is gathered from the prospective borrower--you have to get an automated approval from fannie mae and freddie mac--where most of the money comes from to finance mortgages. Last time I looked, I didn't see an automated system being able to see if you're black white purple,gay, or have poka dots.

    Really? This world is full of dumb shit liberals--always stirring the masses.
  • Semi-Annual reporter | | 28 May 2014, 12:36 PM Agree 0
    It is all part of the ECOA, maybe you should read the act to understand why various questions are put on an application, race, marital status, hispanic, non-hispanic. Because of past sins now it has to be monitored to make sure that the Equal Credit Opportunity Act is being followed. It is a drudge sometimes to have to document everything. But if it keeps discrimination of any kind from happening and never returning. And by the way, there are reports that are filled out usually twice a year to find out who was found eligible, rejected or even withdrawn. And no it isn't automatic, it is a manual report that is done, unless some smart individual found a way to do it automatically or at the very least created a report that can pull the information through automation. It is a necessary evil thanks to certain groups of people.
  • Long time lender | | 05 Jun 2014, 11:45 AM Agree 0
    In my opinion, as an LO for over 23 years. If you have two borrowers, one white and one black, and neither of them qualify, you then counsel them both and tell them each what they need to do in order to prepare for homeownership. 6 months later, one of them calls you back and says, "ok, I did what you told me to do and now I am ready to buy", take a guess which one actually did what they had to do to buy a house? I can show you 23 years of stats and 9 times out of 10, it's the white borrower who did what they needed to do. I don't know why this is, but that is my experience.
    Both were given the same exact opportunity.
  • Justa mortgage guy | | 05 Jun 2014, 12:47 PM Agree 0
    All of these factors come into play but not simply because of race. There are individuals in all races that are good, care about their families, income, assets, credit history, etc. They will try to better themselves, take advice and put an action plan into place. The opposite is true as well. The issue is not race but rather a combination of nature and nurture. And sometimes even with the best of both of those people don't follow that path.

    When the world begins to have these discussions with out lumping anyone into any category, then we will have made the turn. Maybe percentage wise there are a lot of one race that has lower credit or lower income. But that's not because of their race. It goes deeper into the upbringing, the culture, the life lessons and environment.

    So I totally disagree with the assumption that Blacks or any other group are being discriminated against by Fannie/Freddie because of all the same arguments above....it's lack of credit, income, assets or all of the above.

    But the deeper question is why? If it's true that Blacks are being declined at a higher rate, then why? If it's lower income, assets and/or credit then why? Maybe there IS discrimination going on BEFORE they get to the mortgage process. Maybe they can't get the jobs they could. Maybe they can't get the credit they should. Then, if there isn't discrimination there, deeper still. Why can't they get those jobs or that credit.

    Which brings us back to the start of this rant. I guarantee it's all of the above. Some discrimination, some due to upbringing, some due to environment and some due to just plain personalities that don't want to do what it takes and buck the system.

    And that my friends is true of all races, all societies since the beginning.
  • Gordon Schlicke | | 05 Jun 2014, 09:42 PM Agree 0
    Just a mortgage guy is right. The problem isn't our system of granting credit. It is much larger: It is a socio-economic problem that the government has been working on for a long time. Frankly, there has been improvement. I started in 1960 when minorities didn't even apply for a mortgage. Redlining was rampant and few banks were run by minorities. We happen to be in a business where statistics make it appear as though we are the reason for government's failure to cure the larger dilemma. What we are seeing is an emphasis by an administration to bring about change more rapidly. That won't hurt us unless the concept of disparate impact is accepted by appellate courts.
  • Marcia Robinson | | 10 Jun 2014, 10:47 AM Agree 0
    As another 20 year veteran, I think the stats are valid, but to conclude that lenders are discriminating is just unsophisticated thinking. If an african american, hispanic, etc is descriminated in employment, then they are more likely not to be able to appear as a good credit risk. Since they are descriminated against in the job market they take whatever jobs they can just to make ends meet, including working multiple part-time jobs and switching jobs more often. Working more hours for little pay means no time for further education to get a better job. And working rediculously long hours incurs lots more child care expense so we can forget about saving any money for a down payment. As exhaustion sets in bills are occasionally forgotten and credit scores go down. Kids get sick, or worse the parent gets sick, and the medical bills go to collection. Credit scores tank. Then mortgage officers like me have to tell them they don't qualify to buy a house. I tell them what has to change so I can do a mortgage for them. But there are some things about there situation they can't change.

    BTW, how many minority mortgage officers work at YOUR mortgage company or bank? How many are in management? Ever wonder why that was?
  • I Understand the Problem | | 10 Jun 2014, 10:58 AM
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