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. Authors of one academic study out of Northeastern and George Washington universities said they focus on conventional loans only because FHA loans have “long been implemented in a manner that promotes segregation.” As for credit scores, it was impossible for us to include them in our analysis because the CFPB strips them from public view from HMDA data — in part due to the mortgage industry’s lobbying to remove them, citing borrower privacy. The Markup’s analysis does not include decisions made by Fannie’s and Freddie’s underwriting algorithms because, while lenders are required to report those decisions to the government, the CFPB scrubs them from public mortgage data, arguing that including them “would likely disclose information about the applicant or borrower that is not otherwise public and may be harmful or sensitive.” Lenders’ ultimate mortgage decisions are public, however. Scott Olson, executive director of CHLA, said there’s no good reason to keep lenders in the dark: “The more transparent, the more clear the guidance is, the easier it is for borrowers to know what they need to do to be in a position to qualify.” Earlier this month — and weeks after we began asking about its algorithms — Fannie announced in a news release that it would start incorporating on-time rent payments in its loan approval software starting in mid-September. Marcia Fudge, who took over HUD leadership earlier this year, told Axios in June that part of the reason Black ownership rates are so low in America is that “we have never totally enforced the Fair Housing Act.” In an email, HUD press secretary Meaghan Lynch told The Markup that Fudge intends to tackle “systemic discrimination in the housing and credit markets that is at the heart of the racial homeownership gap.” “We do have laws that explicitly protect against discrimination, and yet you still see these disparities that you’re finding, so that suggests that we need better enforcement of existing laws, and more investigations,” said Kevin Stein, deputy director of the California Reinvestment Coalition.