Illinois REALTORS® Study Shows ‘Substantial’ Racial Disparity in Mortgage Applications
New study by Illinois REALTORS® highlights how breed contributes to loan refusals. After reviewing millions of mortgage applications, a “substantial disparity” was found in the rejection rates of African-American applicants versus white applicants – for every year of data. In Illinois, African Americans are twice as likely to have their mortgages turned down because of a “lack of collateral,” according to the Press release from Illinois REALTORS®.
Dr. Marshall Jean, assistant professor of sociology at the University of Chicago, oversaw the data analysis, which inspected Illinois mortgage applications filed between 2007 and 2020. The team was particularly interested in these. rejections based on lack of guarantees. In the past three years alone, African American applicants were twice as likely to be denied their mortgage due to lack of collateral.
Commenting on the results, Dr Jean said: “Although the phenomenon of discrimination in home valuation has been known in the African American community for decades, there has been very little formal research on this. A major hurdle is the lack of available data, which tends to be held by financial institutions and entities like Fannie Mae and Freddie Mac. There are privacy concerns, but these can be treated with caution. The first step in preventing discrimination in assessments will be a better scientific understanding of it. “
Another trend also emerges from the data: the homogeneity of the neighborhood is favored by the evaluators. White borrowers were more likely to be denied their mortgage if they lived in diverse neighborhoods, while black and Hispanic borrowers were less likely to be denied their mortgage when they lived in diverse neighborhoods. And the model has remained across socio-economic strata.
“It is very important that we get to the bottom line and that we remove these remnants of systemic injustices from the property appraisal and mortgage lending process as soon as possible,” said Lutalo McGee, Chair of the Valuation Working Group. discriminatory Illinois REALTORS®. “It affects everyone, and we all have to be concerned that it still exists. Imagine it is your grandmother’s hard-earned nest egg that is being robbed. Or you and your spouse fight and sacrifice to have your financial gains eroded for no factual reason. “
Dr Jean also indicated that he would like to expand the study to offer a more in-depth look at the home appraisal process.