A new report shows Black would-be homeowners in Hamilton County remain underrepresented in the mortgage lending process and are denied at higher rates than white borrowers. The study by Housing Opportunities Made Equal (HOME) analyzed mortgage lending data from 2018 to 2023.
"Our goal with the report today, especially in this day and age, is to shine a light on how one of the largest ways we build wealth and stability in our country is working — homeownership," says Elisabeth Risch, HOME's executive director. "We all benefit when we have more homeowners and access to credit for homeownership, to preserve and to obtain homeownership, and that wealth that can be passed on to generations."
You can read the full report on HOME's website. It uses data reported by lending institutions through the Home Mortgage Disclosure Act.
The study is a follow up to HOME's 2022 "Roadmap for Increasing Black Homeownership in Cincinnati and Hamilton County." That report found a 40% gap in Black and white homeownership in the Cincinnati metro area. It recommended further investigation into the role that mortgage lending plays in that disparity.
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Three key findings
Black households are underrepresented in the mortgage lending process.
The study finds, while Black households account for 25% of Hamilton County's population, Black borrowers represent just 15% of those applying for mortgage loans. Meanwhile, white borrowers account for 79% of mortgage applications.
Additionally, white borrowers make up 83% of successful applicants, compared to just 12% for Black borrowers.
"There's lots of reasons behind this disparity," Risch notes. "There's discrimination; there's [the] historical legacy of redlining to Black borrowers. There's also a lot of distrust with financial institutions in the Black community."
Black borrowers are denied at a higher rate than white borrowers.
The report finds Black people who apply for mortgage loans are more than two times as likely to be denied than their white counterparts, regardless of income.
Over the six-year study period, 12% of all mortgage applications were turned down. Of Black applicants, 21% were denied, compared to 10% of white applicants who were denied.
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"What's even more disturbing is that this disparity is even worse holding high-income stable. Looking just at upper-income borrowers, 18% of upper-income Black applicants were denied, compared to only 6% of upper-income white borrowers," says Risch. "That means that the denial rate disparity between upper-income borrowers is 2.8 times, meaning that upper-income Blacks are 2.8 times — almost three times — more likely than upper-income white borrowers to be denied."
Over half of loans made in Black communities go to white applicants.
Neighborhoods where Black households live have much less access to mortgage lending, and when mortgage applications in those communities are successful, it turns out they're mostly going to white borrowers.
Risch says that's particularly concerning for communities of color.
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"In communities of color, nearly 60% of borrowers were white borrowers. This is following our gentrification patterns that we see, we feel, we experience — that in communities of color, that have been historically communities of color and Black communities in Cincinnati, the people able to access home lending for home purchases and refinances are white borrowers."
She attributes that to the aforementioned higher participation and success rates in the mortgage lending process, along with access to historical and family wealth and assets.
Moving forward
HOME says lending institutions need to reform their practices and adopt new policies to address their inequitable numbers. Reforms to down payment assistance programs are also necessary, the report states. Redlining, it says, is not in the past, but remains a problem that needs to be addressed.
During a panel discussion following the report's release, Greater Cincinnati Realtist Association President Marcus Parrish said education is one key to improving outcomes. He said he often runs into clients who are in great-paying careers but come from backgrounds that weren't able to prepare them for how to handle their money or grow their credit.
"If you're coming from a family that's not educated — you don't understand what credit is; you don't understand what debt income ratio is — then [you might make unwise spending choices] ... then you turn around, get older, you try to position yourself to buy a house [and] it comes back to bite you. I just think we got to get more educated on that," he concluded.
Panel members Cincinnati Vice Mayor Jan-Michele Lemon Kearney and Urban League of Greater SW Ohio Head of Policy and Advocacy Jasmine Coaston also noted the credit-building process needs reforms.
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"When we talk about credit scores being a barrier, then we have to look at what goes into the credit score," said Kearney. "At one point, paying rent on time didn't help your credit score. I think that changed last year. But there have been years of people saying, 'Why aren't we counting that in credit scores? You're paying the rent on time, why doesn't that help your credit score?' "
Coaston added paying off credit card debt also doesn't help your credit score, which she says seems counter-intuitive to many. Also, she points out, you don't know what you don't know and you don't know what your parents didn't know, and that can have decades-long ramifications.
"I think it's those little nuances," she said. "Someone told me, when your child was born, you should get a credit card in their name. You should pay pay it off every month. And I'm like, 'Well, my kid is 17. I can't go back to start them with good credit.' But there are white counterparts who knew that, who their children are going to walk out with an 800 credit score when they graduate from college because they know those things, and they're able to navigate systems in that way because the systems were set up for their success."
