Fair Lending summay for 2023

Fair Lending goes well beyond mere compliance -  it’s about ensuring a level playing field and unbiased treatment for all borrowers. Minority borrowers will be a primary factor in driving mortgage growth in the future. If a lender does not have a focus on the minority or diverse borrower, they will fall well behind the market.

Did mortgage lenders adapt their strategies toward Minority / Diverse Markets in 2023?

Did we move in the right direction to close the homeownership gap in 2023 as compared to the previous year?

There is a ton of valuable data that we can make available to you. If you would like a copy of the report that digs deeply into Fair Lending analytics in 2023, please DM me or email me at gregsayegh@ingenius-data.com.

The following is a summary of the report:

Overall production results:

The amount of total purchase share increased slightly for  African American and Hispanic homebuyers. The changes were nominal but moving in the right direction. White and Asian homebuyers showed a slight decline vs total market. These results were muted however as 2023 volumes showed a significant decrease vs. the previous year.

Though overall purchase volume declined in 2023 vs 2022, African American and Hispanic reduction in volume was lower than White and Asian homebuyer volume.

Percent of change: 2023 vs 2022 Purchase units closed 

The amount of total purchase share increased slightly for  African American and Hispanic homebuyers. The changes were nominal but moving in the right direction. White and Asian homebuyers showed a slight decline vs total market. These results were muted however as 2023 volumes showed a significant decrease vs. the previous year.

Though overall purchase volume declined in 2023 vs 2022, African American and Hispanic reduction in volume was lower than White and Asian homebuyer volume.

Hispanic (–11.80%)  

African American  (-18.50%) 

White (-21.30%)  

(Asian -21.90%)

Low-to-moderate income Borrowers

The percentage of loans to Low-to-Moderate (LMI) borrowers remained the same in 2023, averaging about 20% of all purchase mortgages and total closed loans.

Looking at the percentage of LMI loans,  there was no significant difference between LMI loans closed by primary institution type.

IMB’s  20.1% were LMI       Banks 18.4% LMI           Credit Unions 16.2%

Loans closed in Majority-Minority Census Tracts (MMCT)

Total Loans: Loans closed in Majority-Minority Census Tracts remained in the 25-27% range of total closings. Mortgage Banks dominated with almost 67% of total MMCT volume. WOW!

Purchase: the percentage of purchase loans remained consistent YOY with 26% closed in Majority-Minority Census Tracts. Three of four purchase loans in MMCTs were closed by Mortgage Banks. This is profound and shows the commitment of IMBs to the communities of color. Well done!

Denied and Cancelled Loan Applications:

(does not include Preapprovals)

It makes sense to dig into your cancelled and denied statistics. Why? These borrowers have applied for a loan; so half of the sales process is complete.  Each underlying lender has substantial investment into the acquisition and manufacturing of each application. Of course, a lender cannot make every loan, but refining their POS and operations process can help reduce the amount of fallout. What would a slight reduction in fallout to do to your bottom line, while reducing the reduce the homeownership and wealth gap?

There were 627,146 cancelled and denied purchase applications in 2023 for Black, Hispanic and Asian Borrowers. This was 37% of purchase applications. Converting just 10% of this fallout to closed loans or 62,715 loans would have resulted in $22.7 BILLION in additional volume. (Plus, new Realtor and Builder Relationships) Ten percent (10%) reduction takes the fallout percentage from 37% to 33.3% which is still higher than the 28.4% of denied/cancelled loans for white borrowers.

Credit Unions had a much higher percentage of denied purchase applications than IMBs and Banks. Credit Unions had a much higher denial rate than IMBs and Banks for African American and Hispanic prospective homebuyers.

African American and Hispanic Denied/ Cancelled Loans:

Loans Denied: In 2023, African American homebuyers were 2X more likely than white borrowers to have their purchase loan application denied and 1.6X more likely than the total of all borrowers to have their loan application denied. Hispanic homebuyers were 1.6X more likely vs white borrowers and 1.4X more likely vs all borrowers to experience a denied loan response.

Cancelled and Withdrawn loan applications: It is surprising that Asian homebuyers had the highest cancel/withdrawn percentage vs all borrowers with 23% of loan applications cancelled. The percentage of cancelled loans by African American, White, and Hispanic borrowers were a few percentage points lower.