Study: Gender Gap In Mortgage Lending

By Gregory Karp
Chicago Tribune.

Women in the Chicago area are generally less likely to receive mortgages than men, a phenomenon that could hinder women’s ability to build wealth and establish financial security, according to a report to be released Wednesday by the Woodstock Institute.

The study, which controlled for applicant’s income and the size of the loan sought, found that female applicants in the six-county Chicago area were 14.5 percent less likely to receive a home purchase loan than men. A woman whose name headed a joint application was 28.3 percent less likely than a man to receive a loan.

Even so, the report and its main researcher, Spencer Cowan, stopped short of claiming banks were systematically discriminating against women. The publicly available federal data — and the lack of key data on factors such as credit scores that determine loan applicants’ outcomes — raises questions that don’t seem to have obvious answers, said Cowan, a vice president at the Chicago-based nonprofit research and public policy organization.

“All we’re saying is, this is what the data show: Female applicants are less likely to get loans originated than male applicants,” Cowan said.

“We don’t have basic underwriting criteria,” Cowan added. “We don’t have the value of the property or any credit score range or debt-to-income ratio. We can’t look at it and say cause and effect. Maybe (the report) will get the regulators’ attention, maybe they will get access to better data.”

Last summer, the Consumer Financial Protection Bureau unveiled a proposal that would require financial institutions to report as many as 37 new pieces of data on potential borrowers and their loan application outcomes as part of the federal Home Mortgage Disclosure Act. Public comments on the bureau’s proposal were taken until late October.

A final rule is expected to be announced late this summer, Sam Gilford, a bureau spokesman, said Tuesday.

Woodstock’s analysis looked at more than 211,000 home purchase loan applications and almost 563,000 applications for mortgage refinancings in the Chicago area between 2011 and 2013 and by income level of the borrower, mortgage type, originating lender and the location of the property. The research was funded by Chase.

Despite the data shortcomings, the gender disparities in lending rates are stark enough to raise questions, Cowan said.
“If institutions look at their own portfolios and see this kind of disparity, I would think they would look at it and ask, ‘Why is this happening? Are we doing something wrong?'” he said.

“Homeownership is one of the ways people build wealth, which definitely improves your chance of success in our country. If women are less able to get a mortgage to buy a house, this is just another obstacle in the way of women attaining a measure of wealth and security that’s so much a part of being able to have a successful life.”

The study found a notable exception to the gender disparity. Mortgage applications from low-income women were more likely to be approved than from men of similar income. Cowan said one possible explanation is that low-income women might work in low-wage jobs but might work full-time and have conventional work histories. By contrast, low-income men might earn more but work sporadically and ultimately be deemed less creditworthy, he said.

Looking at the raw data and not controlling for income or loan size, an average of 81.1 percent of Chicago-area women who applied for home purchase loans received them versus 83.4 percent of men.

Some lenders fell below that level, however. Among the 17 institutions named in the research, Bank of America had the greatest gender disparity in its raw data, with 65.7 percent of Chicago-area women who applied for home purchase loans receiving them, compared with 71.2 percent for men. The bank’s loan origination rate for mortgage refinancings, meanwhile, was 69.8 percent for women, compared with 77.8 percent for men.

“Valid factors in credit decisions and pricing determinations, including items such as borrower’s credit history, debt-to-income ratios and loan-to-property-value ratios are not included in HMDA data,” Terry Francisco, a Bank of America spokesman, wrote in an email. “These legitimate credit and pricing factors drive disparities. We maintain robust compliance and monitoring procedures to ensure appropriate factors are used in credit decisions.”

On the other end of the spectrum, Bank of Montreal and Wintrust had the smallest disparity between men and women in home purchase lending, and First Advantage Mortgage and First Centennial Mortgage showed more mortgage refinancings made to women than to men.

Cowan conceded banks with wider gender-lending gaps could have different customer bases, different underwriting rules and other reasons that might contribute to the disparity.

“I can’t say there is discrimination in the Chicago mortgage market,” Cowan said. “I can say there are disparities that don’t seem to have a good explanation.”

Nearly one-third of mortgage applications for home purchases were filed by women, while about one in five mortgage refinancing applications was filed by a woman, the study showed.

The study examined only mortgage applications for people with incomes between $20,000 and $999,000, and only for loan amounts between $20,000 and $800,000.

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