Welcome back! Today, we are honoring the recently made federal holiday, Juneteenth, by exploring some of the past and present issues that African Americans have faced in the mortgage industry. Let’s get into to it!
Due to discriminatory lending practices within financial institutions, Congress enacted The Home Mortgage Disclosure Act (HMDA) in 1975 to address these concerns. However, do not be fooled – the disparity still exists! The fact is, African American and Hispanic applicants are denied at much higher rates than White applicants for mortgages and refinances. A few factors go into the approval or denial of a mortgage. These usually includes the applicant’s credit score, debt-to-income ratio, and LTV. Although HMDA was meant to be used to address disparity concerns, it does not include crucial information to help determine if there is comparative evidence of disparate treatment. So, a lot of banks can easily get by with discriminating against African American applicants unless concern is raised and an investigation is held.
Predominately African American communities also experience higher interest rates and fees than predominantly white communities. This along with historic discrimination has discouraged and prevented African Americans from owning homes. It is important that you shop around when looking to finance your new home. Do not accept the first offer – explore your options and compare! And, if a mortgage application asks for you to identify your race, decline to do so.
If you are in the market for a mortgage, please refer to the Federal Trade Commission. They give you advice as a consumer so that you can recognize if you are being treated unfairly. They also give you contact information if you do suspect discrimination. As mentioned before, African Americans are less likely to buy a home but it is truly something that needs to be changed. Buying and owning a home is chance to build generational wealth in the Black Community. White Americans have had a major head start in building generational wealth and owning property. Keep up with our series, get your finances in order, get your credit together, and build a home and wealth for yourself and your family. This is the only way to truly be independent in the U.S.
Hope that you had a Happy Juneteenth and hopefully you are off on this Monday as it is being observed. Write to you next week! Thanks for reading as always.
--JW & FW