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Mortgage denied: Black homebuyers in metro Detroit face 'lending discrimination,' experts say

Posted at 3:55 PM, Mar 30, 2022
and last updated 2022-03-30 17:44:14-04

(WXYZ) — Metro Detroit is considered the nation’s mortgage capital, but even then, most Black borrowers are still getting rejected as they chase their dream house.

"There's a 13% denial rate for white borrowers and a 27% denial rate for African American borrowers in 2020," Anika Goss of Detroit Future City says.

She says across southeast Michigan, Detroit's approval rate for people of color is embarrassing.

"Just looking at mortgages themselves and the number of approvals, Detroit should be at a much higher rate in comparison to other cities around the country that have a similar population," she said.

To apply for a mortgage, you start with filling out an application and attaching supporting documents. Next, the lender reviews your case.

This is the first major hurdle where statistically, most Black applicants get rejected.

Lack of collateral, high debt to income ratio, and insufficient cash are some of the other factors that lead to rejections in this community.

If an applicant does move forward, Steve Tomkowiak of the Fair Housing Center of Metropolitan Detroit, says the next blow comes during the appraisal step.

"The lending process overall, 50% centers around the borrower, the other 50% center around the appraisal of the home. It’s a standard requirement and we are seeing an uptick in appraisal complaints," Tomkowiak said.

He said the challenge also exists for homeowners trying to sell their property.

"They pull down from the walls any art objects, any pictures, anything that would indicate that the home is owned by a Black family and would have someone else stand it," he said. "When the appraiser has to make a home visit that the home has to be appraised, they saw a dramatic increase in the appraised value of the home."

The lender denial rate in Detroit has been as high as 89.6%. Tomkowiak says this could have a real impact on African American communities.

"That’s a real problem with lending discrimination, you destabilize communities. You decrease homeownership rates. You force people into a transit lifestyle from home to home to home," he said. "Some are in substandard housing because of it."

As for solutions, experts say awareness is key. They also say buyers should report any unfair practices.

Buying in: Opportunities for Increasing Homeownership in Detroit through Mortgage Lending by WXYZ-TV Channel 7 Detroit on Scribd

"There is so much already at play," Goss said. "Fannie Mae trying to lead to change credit practices, we know OCC the Federal government looking hard at financial literacy and credit."

Besides the disparity, Goss says mortgage applications across metro Detroit have increased and this includes African American applicants.