By Victor Ochieng
There has been a spate of news coverage about “America’s inner cities,” which is a phrase interpreted to mean minorities, including Blacks and Latinos.
While such narratives continue, Richard Rothstein, a research associate with the Economic Policy Institute, says the inner city life doesn’t exclusively encompass African Americans. He notes that more Blacks are now living in suburbs than in ghettos, and that an estimated one third of African Americans earn more than the respective median incomes.
But even with all such improvements, Blacks still face a raging challenge – access to homeownership. Why is it that so many Blacks and Latinos still find it a challenge securing loans at disproportionate rates?
The Center for Responsible Lending (CRL) recently conducted an analysis of the 2015 Home Mortgage Disclosure Act (HMDA). In their analysis, they pointed out that Blacks still find the American Dream elusive despite the fact that the country has fully recovered from the housing collapse.
“The HMDA data has shown a persistent difference in denial rates by race and ethnicity and this year is no exception,” wrote CRL. “20.8 percent of African-American applicants were denied a loan in 2015 compared to 16.1 percent of Hispanic applicants and 10 percent of non-Hispanic white applicants.”
In the year 2015, over 6 million home purchase mortgages were realized, yet a mere 51,202 (2.7%) were done through conventional loans directed to Black home buyers. From the same category, non-Hispanic Whites accounted for 1.36 million conventional loans, while Latinos accounted for 96,975.
With such disparities, it’s sad to learn that it’s actually conventional loans that are the most available, cost effective and sustainable mortgages.
The figures coming from 2015 are nothing but a continuation of an existing trend that has been around since the housing meltdown; government-backed mortgage loans such as VA and FHA represent a significant majority of loans channeled to Blacks (120,618), a figure that’s more than twice that provided through conventional loans. Latinos on the other hand received 162,317 of these loans, compared to 765,880 for Whites.
How can Blacks have such dismal numbers yet they make up 13% of the country’s population and have 1.8 million who are aged 25 and above holding advanced degrees?
The disparities could be attributed to the rise in credit score needed for one to qualify for the loans. Last year, for example, the average credit score needed for one to qualify stood at 750, a figure represented a 50-point leap compared to 2001.
The other reason is the historical injustices that Blacks went through for many years, while Whites were favored in securing mortgage loans and thus built enormous wealth, which eventually raised their credit scores.