Black and Latino homeowners left behind in mortgage refinancing wave

Discrimination in lending and appraisals, disproportionate unemployment among factors

National /
Jun.June 23, 2021 01:00 PM
The pandemic disproportionately impacted unemployment rates for Black and Latino households, making them more likely to enter mortgage forbearance. (iStock)

The pandemic disproportionately impacted unemployment rates for Black and Latino households, making them more likely to enter mortgage forbearance. (iStock)

Low interest rates encouraged millions of Americans to renegotiate their mortgages in 2020, but a litany of new and existing barriers have left many Black and Latino homeowners unable to take advantage.

While eight million mortgages were refinanced in 2020, only 6 percent of Black homeowners and 9 percent of Latino homeowners renegotiated their mortgages, the Wall Street Journal reported, citing data from Equifax and Black Knight, among others. That’s compared to 12 percent of white homeowners and 14 percent of Asian homeowners.

Freddie Mac estimates that refinancing now could save Black and Latino households about $1,200 per year, but numerous obstacles that complicate the process.

Refinancing requires an average of $5,000 in up-front closing costs, according to Freddie Mac, rendering it inaccessible for homeowners who have more debt and less cash on hand. The pandemic disproportionately impacted unemployment rates for Black and Latino households, making them more likely to enter mortgage forbearance, which disqualifies them from refinancing.

Homeowners could also be more hesitant to apply for refinancing programs if they struggled to qualify for their first mortgage, Wharton real estate and finance professor Benjamin Keys noted to the Journal. Studies suggest that Black and Latino borrowers are significantly more likely to be denied conventional mortgages than white or Asian borrowers.

An additional impediment is racial bias in the appraisal process. A 2018 study by the Brookings Institution found that discrimination in home appraisals has led owner-occupied homes in majority-Black neighborhoods to be undervalued by an average of $48,000.

[The Wall Street Journal— Alexandra White


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