Are Blacks Rejected for Mortgage Loans Due to Racism? Thomas Sowell

When banks approve a higher percentage of loans to white applicants than to black applicants, that is automatically called discrimination, but when Asian-Americans are approved at a higher rate than whites, it is not. Nor is it called discrimination when Asians do better than whites on SAT scores, unemployment rates or income.
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[happylittletrees]

I was an underwriting assistant in mortgage banking from 1993 to 2007. The loan officer would be all over that underwriter and their supervisor for ANY unwarranted loan denial because of their commission based pay. The underwriting department bonuses would be adversely affected too. Nobody would let a racist loan denial go through because it hurts everyone's take home pay.

[hwoodist]

When going through the process of obtaining a mortgage for a rental property 8 months ago, they put me through the ringer. It was not a pleasant process, but having a good mortgage person makes a huge difference.

[CatEyes]

I was a mortgage lender and a Realtor. It's damn near impossible to be racist within these policies and procedures. Both of these roles, within real estate, are commission only based so if you deny anybody of any color you don't close the deal and you don't make a dime... This eliminates tons of the racist nonsense. Further bankers don't get up off their seats and only lend to their neighborhood anymore many times the banks are clear across the country and they have no idea about who lives in what neighborhood it is truly just a mathematical equation.... Those that say their house was reduced in value because of racism? Well if you had a good agent they would have told you to take down your family pictures for all sorts of reasons and without family pictures how would anybody know what color you are??? It doesn't even make sense but they're really pushing the red lining idea in our high schools so that they can beat the band about what a racist Nation we are and white people can feel bad... letters of explanation help you get a better deal... without the letter you would get a worse rate or a higher fee or no loan at all and this happens across every single color and income.

[nolongeramused]

My wife was in the business for decades, up to and including being the CEO/President of a large financial institution that did mortgages and other loans. Applications are evaluated, and have been for decades, strictly on the ability to repay, and the likelihood of doing so on time. The process is blind to race, ethnicity, sex, and any other category that isn't directly related to your employment history, assets, and credit score. Your level of risk determines not only if you will get the loan at all, but the interest rate you'll pay.

The only people that aren't blind to those factors are government bureaucrats, who keep insisting that unqualified people be given loans. That government insistence that loans be given to unqualified applicants is what created the 2007-2008 meltdown.

[perrykeshahwalker]

These are facts trust me I know. My wife and I had a shoddy credit history. However when I started making well into the six figures we initiated buying a home. My credit score went up to the 700's but we had a lot of trouble when it came to secureing the loan. Though we had money down and was using the VA system we had to write letters of explanations for some of the things that was on our credit reports. Even some of my white, Mexican and Asian friends told me that they had to do the same thing as well so it's not racism on a large scale though I do believe that some lenders can be racist. Still, It's pure economics

[Phil-D]

People are rejected due to credit scores, and little else

[Reever]

Black or white or green, bad credit means higher interest loans. People that can least afford it get charged the most for money.

[tomster]

whats the worst thing about this racism is that if the situation was switched the crime stats leaders would revel happily at the troubles of others.

[hecknogmo]

Makes me wonder, are newspapers and politicians trying to divide? Why would they leave out such an important variable as not looking at one’s credit history as being a possible reason as to why someone is denied a loan? Why did the fed run statistical analysis without that variable being considered?

[Munce]

Great work Dr. Sowell! Scooby snacks for you.  

Praying for Israel. 

My allegiance is to Liberty, the Republic, and Democracy.

[S_Haneef]

If we goggle mortgage discrimination settlements, several stories come up. The most recent is a bank in LA that paid 31 million dollars in a settlement. We know government examiners are sent in to these banks after numerous complaints to look for discrimination practices. Why would banks pay settlements if they're innocent?

[Macdonald]

many wealthy individuals maintain their wealth by being frugal with their spending and consistently investing their money. On the other hand, some people who are struggling financially may prioritize impressing others with their spending rather than focusing on long-term investments.

[chadjohnsen]

The subprime loan crisis hit about three years later. I think the Government should’ve stepped in to stop the practice.

[lsporter]

I truly appreciate this explanation using facts and data. Great commentary.

[anthonybatulis]

The loans get sent into the underwriter. They decide who gets loans and who doesn't. The underwriter has no idea what color you are. The lenders want these loans to go through. The loan officer wants their commission.

[kimkim]

I really enjoy it when the government makes banks give them loans.
This will cause a housing market crash. Which means I'll be able to buy more homes to fix up and rent out. Until the market recovers, at which time I''ll sell.
10 years ago.
2011, I picked up a house for 17K.
Just sold it for 100K Doubling my money every 2 years. That's a 50% per year profit.

[commentsedited]

Boy ain't that the honest truth.
It's to the point where you can say the lines before the actors..

[heitormneto]

You're my hero Mr Sowell!
From Brazil!

[jryan]

There are many things that research would need to look out prior to race hustlers screaming about race. As mentioned, credit scores. Not everyone is the same. Most people aren’t the same in many ways. What do the parties have saved up? What area are they buying? Cost of property? Cost of property vs income, down payments, longevity at work, mortgage company and terms (they all offer different terms), time of purchase (rates fluctuate), etc. there are likely many more. But in order to prove discrimination, you’ll need to find a black and white that are identical (or close) with the above criteria. If they do not have the same criteria, why would the results be the same? They should be different and you should expect them to be different.

[RonaldBurton-ueyk]

"Race matters, and we need to say so."
~Elizabeth Warren

Demagouery is about emotion, not facts.