The recent Urban Institute study showing that African-Americans and Latinos with similar credit profiles as non-Hispanic white applicants experience much higher rejection rates when applying for mortgages is but the latest reminder that blacks and Hispanics do not have equal access to mortgage credit. And disparate access to mortgage credit is the single most important reason for the enormous wealth gap between people of color and non-Hispanic whites.
Today, African-Americans and Latinos hold only 6 cents and 7 cents, respectively, for every dollar of wealth held by whites, according to an analysis of the latest census data by the Center for Global Policy Solutions.
Mel Watt, the new director of the Federal Housing Finance Administration, has the authority to address unequal access to mortgage credit for people of color. Fortunately, his first public remarks made it clear that access to affordable, safe, and sustainable mortgage credit ranks among his highest priorities.
This focus for the FHFA comes none too soon. When compared with mortgage lending activity a decade ago, the number of loans made to African-Americans is down 55 percent, and those made to Latinos are down 45 percent.
Given the fact that the equity in owner-occupied homes is the largest source of savings for the typical American household, difficulty obtaining a mortgage severely constrains wealth-building. In fact, home equity accounts for 92 percent of personal net worth for the typical African-American household and 67 percent for Latino households.