For the majority of Americans, home ownership is a part of the American Dream. Not only seen as a signifier of social status, home ownership is a significant contributor to personal wealth. The average homeowner will be ahead of the average renter by a multiple of 45 on a lifetime financial achievement due to wealth accumulation. The pathway to home ownership and thereby its benefits often starts with mortgage loan. Looking at the mortgage loan market, therefore, allows us to examine who is even afforded the opportunity to achieve this goal.
The Consumer Financial Protection Bureau (CFPB) does this on a national level with its analysis of annual residential mortgage lending data. The data is available through the Home Mortgage Disclosure Act (HMDA), which requires financial institutions to maintain, report, and publically disclose loan-level information about mortgages. The analysis done by the CFPB revealed significant racial disparities. Key findings include:
- Non-Hispanic whites with 64.9% account for the largest share of home-purchase loans made in 2017.
- Similarly, in the refinance loan market, Non-Hispanic whites made up the largest share of approval at 63.3%. The next largest group was Hispanic white with 6.8% approval.
- Overall, 10.8% of home loan applications were denied and 26.4% of refinance loans.
- On home purchase loans, Black applicants received denials 18.4% of the time, while the rate for non-Hispanic whites was 8.8%.
- In the refinancing market, Blacks were rejected on 39% of their applications, Hispanic whites on 30.2%, Asians on 24.8 % and non-Hispanic whites on 22.9%.
Using the HDMA data, I replicated this analysis to examine the state of the Maryland loan market and to determine how it compares to the nation as a whole. Maryland loan applications accounted for roughly 2 percent of all loan applications made in 2017. In, Maryland:
- Non-Hispanic whites account for 22.8% of home-purchase loans. Blacks trail not far behind, accounting for 20.1%.
- Outside of joint applications, Blacks applicants, at nearly a quarter, comprise the largest share of the refinance loans made.
- Eleven percent of home loan applications were denied and 24.6% of refinance loans.
- On home purchase loans, Black applicants received denials 16.7% of the time; the rate for non-Hispanic whites was only 5.8%.
- In the refinancing market, Blacks were rejected on 36.2% of their applications, Hispanic whites on 27.8%, Asians on 24.2 % and non-Hispanic whites on 18.7%.
The Maryland loan market appears to differ drastically from the national market in regards to the distribution of home-purchase loans. While the share of home purchase and refinancing loans overwhelming granted to non-Hispanic white borrowers nationwide, in Maryland the distribution is more evenly spread. However, this distribution mirrors the demographic proportions of Maryland loan applicants. The application pool in Maryland is disproportionately comprised of minority and joint applicants. Overall, the denial rate is not much different from the national rate. The home purchase loan denial gap in Maryland is actually slightly wider between non-Hispanic white applicants and Black applicants than it is nationwide. Unfortunately, Maryland is not immune from the racial disparities that exist in the loan market nationwide.