Purchase mortgage denial rates still higher for minorities

Purchase application denial rates remained higher for Blacks and Hispanic whites in 2021, but the share of denials for each group were smaller compared with each group’s 2020 numbers, the latest Home Mortgage Disclosure Act data release from the Consumer Financial Protection Bureau found.

For all applicants, the purchase application denial rate was 8.3% in 2021, down from 9.3% in 2020. For Black potential homebuyers, last year’s denial rate of 15.3% was nearly 3 percentage points lower than 2020’s 18.1.

For Hispanic whites, the denial rate of 10.6% was nearly 2 percentage points below the prior year’s 12.5%.

But for non-Hispanic whites, the denial rate of 6.3% was down 60 basis points from 6.9% in 2020, while for Asians looking to buy a home, the denial rate dropped to 7.9% from 9.3%.

Denial rates for Black homebuyers were markedly higher compared with other groups across all loan types except for Federal Housing Administration-insured mortgages and the rarely used U.S. Department of Agriculture-guarantee program.

The denial rate for FHA loans, a program that is designed for homebuyers who lack down payment funds and are credit challenged, was 12.4% across all borrowers.

For Blacks, the FHA denial rate was 16.1%, while for Asians it was 14.2%, Hispanic whites, 11.9%, and non-Hispanic whites, 9.8%.

Denial rates for refinance applications increased to 14.2% last year from 13.2% in 2020. But for Blacks seeking to refi their mortgage, the denial rate was 23.6% and for Hispanic whites it was 17.6%. For Asians, it was 12.3% and for non-Hispanic whites the share was 11.8%.

The CFPB’s look at the data also confirmed consolidation among the number of companies originating mortgages as well as the share being produced by the top 25 lenders.

The number of financial institutions that originated at least one closed-end mortgage fell 3.1% year-over-year to 4,332 in 2021 from 4,472.

Furthermore, of the active lenders in 2021, just 972 were independent mortgage bankers, the rest being some form of or affiliated with a depository.

But the nonbanks did the bulk of the work. In 2021 nearly 21.5 million applications were filed and almost 14 million loans originated. IMBs handled 13.9 million applications and 8.9 million originations.

At the same time, the 25 most prolific lenders had a combined share of 43.9%, compared with 38.9% in 2020, 37.2% in 2019 and 33.8% in 2018.

The top 10 lenders by units last year according to the HMDA data were: Rocket, 1.2 million; United Wholesale Mortgage, 654,000; loanDepot, 390,000; Wells Fargo, 376,000; Freedom Mortgage, 361,000; JPMorgan Chase, 274,000; Fairway Independent Mortgage, 236,000; Caliber, 232,000; Homepoint, 209,000; and Pennymac, 209,000.