MEMPHIS, Tenn. – This is called modern redlining, practices that discriminate against a potential buyer based not on their income or credit history, but on their race.
Even when applicants qualify for a mortgage, the so-called American dream is still out of reach.
FOX13 has learned that the mortgage rate gap between black and white applicants is shocking.
In fact, black applicants are denied mortgages at a rate 84% higher than white applicants.
This means home ownership is simply out of reach for many.
For many black candidates, the ultimate goal is to own a home.
But, it’s the process of having good credit, high scores, less debt and down payments that closes the door for some.
“It was stressful, very stressful,” contestant Desiree Washington said.
“The whole process had become very stressful and I wanted to get it over with,” contestant Jeffery Hampton said.
Washington and Hampton are two examples of black applicants with good jobs and decent credit. Washington said that between having a good job, a high 500 credit score, providing all the documents, sorting out his credit and dipping into his 401,000 for the down payment, the process was still grueling.
“The underwriting process of buying a home has got to be the most stressful part because it separates your whole life. They dig into every aspect of your home like everything,” Washington said.
Hampton lived in an apartment and nearly walked away from the deal. His credit score was close to 600, but it took him nine months to get a mortgage.
“I didn’t think I would be turned down that many times and I thought I had pretty good credit and found out I was being lied to about some things,” Hampton said.
Again, he has decent credit, never filed for bankruptcy, and had a substantial down payment.
According to the Home Mortgage Disclosure Act, nearly 20% of black applicants are denied a mortgage. This is the highest among all races. Currently, Black home ownership is up 44% from the recent low of 40%, but the highest level ever is 49.7% and that was in 2004.
The report shows that most black applicants are turned down because they have bad credit or too much debt.
“When they look at us, and the first thing they say is they raise the bar, and then they say ‘Well, he can’t get this because of this’, but the same person working the same job of a different color can achieve that,” Hampton said.
FOX13 sat down with real estate broker Travis Patterson. He had clients with OK credit and many with high scores, but they were always turned down.
“Fifteen years from now, how often do you see someone, there might be some discrimination or there might be some redlining? How often do you see that? All the time, every year,” Patterson said. .
He said the rejection rate for his black customers was at least 3 to 1, if not more.
For those customers, he said, the problem often includes income disparities, credit difficulties and loans from big banks.
“Their guidelines are totally different from those of a local lender or broker. I see people with good credit, good income and they don’t follow retail banking guidelines whatever that means and they get a turndown,” Patterson said.
According to HMDA, in 2020, Wells Fargo approved less than half of black homeowner refinance applications.
It’s the disparity.
* Wells Fargo approved 72% of white applicants versus 47% of black applicants.
“When someone applies for a mortgage, the system may approve it, but it may be information on a background check or a title search that may not show up on a credit report, so which results in customer rejection,” Patterson said.
He admits that many clients are unclear about the impact of income, student loans, car bills, credit card debt, payday loans and child support, even though they don’t include closing costs and how much you actually pay per month.
“Taxes, insurance and mortgage insurance; So the consumer will look at that and say, ‘I can afford $1,000 a month,’ but you get a lender and their $1,400 a month,” Patterson said.
He works directly with local lenders to help his clients who are often approved immediately.
“Local lenders have a bunch of programs that they have to use and get rid of a lot of money. So they can produce more mortgages to get more people into homes,” Patterson said.
Patterson said anyone who wants a home should have the ability to determine the key to qualifying for a mortgage based solely on their credit history, not their race.
“I deserve a house. I deserve a nice home. I deserve it like anyone else. Don’t rely on the color of my skin to explain why you didn’t,” Hampton said.
There are currently several resources to help home buyers.
There are FHA, VA, Fannie Mae, and Freddie Mac loans.
You can also consider using your 401-k or creating a savings app to help with the down payment and closing costs.
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