The secret bias hidden in mortgage-approval algorithms

Get Nadine White's Race Report newsletter for a fresh perspective on the week's news Get our free newsletter from The Independent's Race Correspondent Get our free newsletter from The Independent's Race Correspondent SIGN UP I would like to be emailed about offers, events and updates from The Independent. An investigation by The Markup has found that lenders in 2019 were more likely to deny home loans to people of color than to white people with similar financial characteristics — even when we controlled for newly available financial factors that the mortgage industry has in the past said would explain racial disparities in lending. — Holding 17 different factors steady in a complex statistical analysis of more than 2 million conventional mortgage applications for home purchases reported to the government, we found that, in comparison to similar white applicants, lenders were: ● 80% more likely to reject Black applicants ● 70% more likely to deny Native American applicants ● 50% more likely to turn down Asian/Pacific Islander applicants ● 40% more likely to reject Latino applicants These are national rates. “Your work shows that’s not true.” The American Bankers Association, The Mortgage Bankers Association, The Community Home Lenders Association, and The Credit Union National Association all criticized the analysis. “If the data that you’re putting in is based on historical discrimination,” said Aracely Panameño, director of Latino affairs for the Center for Responsible Lending, “then you’re basically cementing the discrimination at the other end.” In written statements, Fannie said its software analyzes applications “without regard to race” and both Fannie and Freddie said their algorithms are routinely evaluated for compliance with fair lending laws, internally and by the FHFA and the Department of Housing and Urban Development.