More than half of black applicants are rejected
In Marion County, more than half of black applicants who sought a mortgage loan for a site-built home in 2015 and '16 were rejected. That denial rate for blacks was among the highest in any metro area nationwide during that time, according to reporting being published today.
Reveal from The Center for Investigative Reporting spent more than a year studying 31 million mortgage loans and applications. Working with The Associated Press, it found that minorities in 61 of 409 metro areas nationwide, including Ocala, were being denied mortgages at a higher-than-normal rate. The Ocala metro area is all of Marion County.
After controlling for income, neighborhood and loan amount, black applicants in Marion County were 3.5 times more likely to be denied a home mortgage than their white counterparts, and Latino applicants were 1.7 times more likely to be denied, the news organizations found. The analysis only considered applications for site-built homes (not manufactured homes) and did not account for applicants' credit scores or debt-to-income ratios.
According to Reveal, there were 5,625 applications for mortgage loans in Marion County in 2015 and '16. Of those applicants, 78.7 percent were white, 5 percent were black, 7.8 percent were Latino, and 8.5 percent were other races.
The overall denial rate was 20.7 percent. It was 53.2 percent for blacks, 34.6 percent for Latinos and 17.7 percent for whites.
The overall approval rate was 62.7 percent. It was 65.6 percent for whites, 51.6 percent for non-white Hispanics and 28.4 percent for blacks.
Some applications were neither approved nor denied. They were withdrawn or otherwise handled.
Florida Credit Union processed 18.3 percent (1,030 of 5,625) of all mortgage loan applications for site-built homes in Marion County during 2015 and '16. That's more than any other lender.
Reveal's analysis found that, in Marion, 80.8 percent of Florida Credit Union's black applicants, 74.4 percent of its Latino applicants and 60.4 percent of its white applicants were denied.
Of the 156 black applicants, six (3.9 percent) were approved. Florida Credit Union officials said their records show 284 black applicants and 19 approvals (6.7 percent.) Both Reveal and Florida Credit Union used Home Mortgage Disclosure Act (HMDA) reports. But the Reveal study reviewed only applications for site-built homes, while the credit union also included applications for manufactured homes.
If Florida Credit Union's numbers are removed from the picture, the Ocala metro area's profile is more in keeping with the national picture.
Florida Credit Union is a nonprofit financial institution owned by its 84,000 members in 30 counties, most in North Central Florida. Anyone living or working within the communities it serves is eligible to join.
CEO Mark Starr said most of the institution’s mortgage loan applications are submitted to the Federal National Mortgage Association (Fannie Mae) for review by its underwriter program. That program considers applicants' debt-to-income ratio, employment history, income and other factors, but does not consider race.
Starr also noted that Florida Credit Union serves a higher rate of low-income families than the average lending institution; thus, its members have less chance of securing a home mortgage loan.
“Any form of intentional discrimination based on race, religion, ethnicity or any other commonly recognized prohibited basis would be antithetical to the (Florida) Credit Union’s mission and purpose as a cooperative community financial institution,” Starr wrote in a prepared statement.
To qualify for a Fannie Mae loan in 2015 and '16, applicants had to have a credit score of 620 or higher, and debt-to-income ratio of 45 percent or less, and also pay a 3 percent down payment.
“Our (Florida Credit Union members') household income is lower than most mortgage lenders',” Starr said. “This is a factor. In fact, we are designated a low-income credit union by our regulator, NCUA (National Credit Union Association). We also open accounts for members regardless of credit score.
“National banks have referred consumers to us by name when they would not open a particular account, further creating a larger lower-income pool of potential mortgage applicants" at Florida Credit Union, he said. “Also, we turn more inquiries into applications than many lenders do.”
Starr said federal law requires lenders to accept loan applications from all people who insist on applying, regardless of their credit standing.
“Many mortgage originators will screen people and not take applications they do not think will go anywhere,” he said. That might explain why Florida Credit Union handled a plurality of Marion County's applications for site-built home in 2015 and 2016.
“When we take an application and it cannot be approved, our staff is trained to counsel the member as to what they need to do to be able to get a mortgage loan,” Starr said. “Unfortunately, many consumers have no idea how the mortgage process works. Many will heed our advice and later are able to position themselves to get a mortgage loan. Our goal is to keep improving the lives of our members. This is why we make it a point to not discourage anyone from applying, although it affects approval rates because our numerator is much larger with this approach.”
The Reveal data shows that Florida Credit Union received 125 home mortgage applications from Latino applicants in Marion County and approved 12.
In all, 6.4 percent (18 of 281) of Florida Credit Union’s black and Latino applicants in Marion County were approved, according to the Reveal data. Company-wide, 41 of 697 black and Latino applicants were approved. That' 5.9 percent.
Florida Credit Union's black applicants are four times more likely to be denied than whites, and Latino applicants are two times more likely to be denied than whites.
When Florida Credit Union’s data is removed from Marion County’s overall picture, the approval rate for white applicants climbs to 75.8 percent. The rate for black applicants rises to 58.7 percent and to the rate for Latino applicants jumps to 68.3 percent. Likewise, when Florida Credit Union’s numbers are removed, the denial rate for black applicants drops from 53.2 percent to 19.1 percent and for Latinos drops from 34.6 percent to 18.7 percent. For whites, the denial rate drops from 20.7 percent to 10.8 percent.
According to the Pew Research Institute, the national denial rate in 2015 was 27.2 percent for black applicants and 19.2 percent for Latino applicants. The national average denial rate for white applicants was 10.8 percent.
The data suggest that, when Florida Credit Union data is excluded, Marion County minorities are getting denied less often than the national average, while white mortgage denials were about the same as the national average.
Marion County resident and black community leader Whitfield Jenkins said the importance of obtaining a home mortgage cannot be overstated. "Home ownership is the foundation of black wealth," he said.
Likewise, the inability, for whatever reason, to establish home ownership can have longstanding effects on a family's ability to better itself and improve its financial position in future generations.
Jenkins is president of the Liberation Ocala African American Council, Inc., a community group whose scope of service includes economic development and community building. He said he is eager to learn more about the data being reported today and hopes to work with the NAACP and similar groups to help African-American residents overcome systemic obstacles to financial success.
"We do need to find a way to establish communication with our lending institutions," Jenkins said.
Narvella Haynes, also an activist in Marion County's black community, said the disadvantages for black residents start long before they fill out a loan application.
"Minorities are at the bottom of the totem pole when it comes to the jobs and pay," she said. "If you are in the upper class, you get those connections for better paying jobs."
According to Census data, 45.8 percent of black households in Marion County earn less than $30,000 per year, compared with 26.4 percent of white households. A report by ValuePenquin, a data research company, states the average black American’s credit score is 677. That's 24 points behind the average for white Americans.
A household earning $30,000 annually can’t have more than $13,500 in annual debt ($1,125 monthly) if it wants to qualify for a loan. That debt includes rent, car payments and credit card obligations.
A year ago, the Pew Research Center conducted a study and found black and Latino applicants have more challenges getting an approval for a home mortgage than their white counterparts.
The study found that denial rates of all races of applicants have fluctuated at the same pace since 2000.
• Denial rates for black applicants have declined from 44.6 percent in 2000 to 27.4 percent in 2015.
• Denial rates for Hispanic applicants have declined from 31.4 percent in 2000 to 19.2 percent in 2015.
• Denial rates for white applicants have declined from 22.3 percent in 2000 to 11.8 percent in 2015.
The study also showed, however, that home ownership has fallen sharply since the housing boom peaked in 2005. Only 41.3 percent of blacks and 47 percent of Latinos own homes, while 71.9 of whites are living the American dream. The Pew study states that home ownership gap between blacks and whites has widened since 2004.
Pew looked at mortgage data and found continuing challenges of black and Latino home buyers. They have a much harder time getting approved for conventional mortgages than whites and Asians. And when they do get approved, blacks and Latinos often pay higher interest rates.
The reasons lenders cite for turning down mortgages: debt-to-income ratios for white and Latino borrowers; poor credit history for black borrowers.
Pew noted that fewer blacks and Latinos are home owners because a lower percentage of both races are applying for home loans. “In 2015, for example, only 132,000 blacks applied for conventional loans, down sharply from 1.1 million since 2005,” the Pew study reported.
Hugh Dailey, CEO and president of Community Bank and Trust of Florida, said home prices also must be considered in this picture. When unemployment skyrocketed after the recession hit in 2008, it was difficult for anyone to get a mortgage. Now unemployment has dropped to 4.1 percent in Marion, but housing prices have skyrocketed.
In December, the average home sold for $152,975, up 10 percent in one year. At those prices, Dailey said, even though unemployment is low, working families still may not be able to qualify for a mortgage.
“None of us (lenders) wake up in the morning and drink our coffee and say: ‘How can we discriminate today?’ ” Dailey said. “There are many federal regulations today than 20 years ago. It is much harder today to get a loan than it was 20 years ago.”
Joe Callahan can be reached at 867-4113 or at email@example.com. Follow them on Twitter @JoeOcalaNews.