Female mortgage applicants are less likely to have their loans approved than their male counterparts, according to a new report by the Woodstock Institute, prompting researchers to call for further investigation into gender discrimination in lending practices.
After studying 2010 Home Mortgage Disclosure Act (HMDA) data for the Chicago six county region, which includes Cook, DuPage, Kane, Lake, McHenry, and Will counties, the Woodstock Institute found than “female applicants overall were about 8 percent less likely to have purchase mortgages originated and about 21 percent less likely to have refinance mortgages originated than were male applicants.”
The study, called “Unequal Opportunity: Disparate Mortgage Origination Patterns for Women in the Chicago Area,” analyzed 58,870 applications for purchase mortgages and 198,522 applications for refinance mortgages from 2010. It examined data for originated or denied loans of amounts between $20,000 and $800,000 for applicants with incomes between $20,000 and $999,000.
The study also found that, across all race categories, joint applications headed by women (a female mortgage applicant with a male co-applicant) were 24 percent less likely to have purchase mortgages originated and 39 percent less likely to have refinance mortgages originated than joint applications headed by men.
The largest disparity amongst joint application origination occurred for African-American females who, if they headed a joint application, were 44 percent less likely to have refinance mortgages originated and 34 percent less likely to have purchase mortgages originated.
“I’m not really sure why this is happening,” said Spencer Cowan, vice president of research at the Woodstock Institute.
Referring to the findings as “perplexing”, Cowan said more information needs to be made available from the HMDA data to accurately draw conclusions.
“At some level we need to look at more detailed information and try to figure out why this is happening,” said Cowan.
The study calls for the appraised value of the properties, applicants’ credit scores and debt-to-income ratio to be made accessible for outside observers to “more clearly show whether there was disparate impact or some legally defensible justification for the significant differences found between the origination rates for female and male mortgage applicants.”
“There may be some aspect of a seemingly objective underwriting criteria that’s resulting in a disparate impact on female mortgage applicants,” Cowan said.
On February 15, the U.S. Department of Housing and Urban Development (HUD) implemented a disparate impact doctrine, called the Fair Housing Act’s Discriminatory Effects Standard, “to prohibit practices with an unjustified discriminatory effect, regardless of whether there was an intent to discriminate.” The Fair Housing Act outlaws discrimination in renting or purchasing a house based on a protected class, which includes race, ethnicity, gender, marital status, or physical disability.
The new doctrine indicates that if a policy has a disparate impact on a protected group, it doesn’t have to be shown that there was intent to discriminate. If lenders didn’t mean to deny women access to mortgage credit, but if the underwriting criteria ended up with that result, it would be a violation of the Fair Housing Act.
“This seems to be systematic of all kinds of structural issues that affect women and girls,” said K. Sujata, president and CEO of the Chicago Foundation for Women. “The way our systems are set up, what is considered gender neutral is really not gender neutral.”
Sujata said the structural issues that are at the root cause of disparate impact against women in mortgage lending needs to be investigated. She expressed gratitude toward the Woodstock Institute for bringing the statistics to light, but said further study is “definitely needed.”
“There are more than 300,000 female-headed households in (Chicago) and homeownership is considered the American dream,” she said. “This is one of the asset building strategies for women and it’s really important that it be addressed.”