Minority Loan Denial Rate Rises

Minority home loan applicants were slightly more likely to be turned down in 2003, though lending in minority and poor neighborhoods grew sharply, according to a federal report released Monday.

The Federal Financial Institutions Examination Council, an umbrella group of regulators, said denial rates for mortgage loans rose from a year earlier for American Indians and native Alaskans, Asians and Pacific islanders and Latinos.

African Americans saw their loan denial rate slip but remain the highest of any ethnic group, the council said. The denial rate for whites held steady at 11.6%.

The data come from more than 8,000 banks and other mortgage lenders required to report loan data under the federal Home Mortgage Disclosure Act. The council reports the denial rates annually.

Community groups point to the differences in mortgage denial rates among ethnic groups as proof that lenders often practice discrimination on credit decisions. But banking groups and the Federal Reserve say the data from the disclosure law are too limited to make such accusations.

In 2003, the home loan denial rate for American Indians and native Alaskans rose to 24%, up from 23.3% in 2002. The denial rate for Latinos increased to 18.4% from 18.2%, and the rate for Asians and Pacific islanders continued to be below that of whites but rose slightly, to 11.4% from 9.8%. Blacks were slightly more likely to have their loans approved last year, however, as the denial rate dipped to 24.3% from 26.3% in 2002.

But even as the news on denial rates was mixed, the data also showed sharp gains in loans in predominantly minority and poor neighborhoods.

According to the report, there was a 14.5% gain in 2003 in the number of loans in neighborhoods that were 80% to 100% minority. The report also showed a 15.6% gain in loans in poor neighborhoods, defined as those in which the median family income was at most 80% that of the surrounding metropolitan area.