{"id":1055,"date":"2020-11-02T06:00:23","date_gmt":"2020-11-02T11:00:23","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=1055"},"modified":"2024-04-25T23:20:28","modified_gmt":"2024-04-26T03:20:28","slug":"black-homeownership-and-housing-amid-persistent-discrimination-new-potential-for-change","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/black-homeownership-and-housing-amid-persistent-discrimination-new-potential-for-change\/","title":{"rendered":"Black Homeownership and Housing: Amid Persistent Discrimination, New Potential for Change"},"content":{"rendered":"\n

Home shopping and investment property buying are rapidly\njoining the digital arena. Can technology offer new models to alleviate bias in\nlending practices?<\/p>\n\n\n\n

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The expanding property tech trend offers convenience in\nmortgage and property shopping. It offers effective ways to market properties\nfor property owners and managers, now that marketing messages can be placed\nonline to show loan options for interested applicants to use instantly. But for\nsome home seekers, a big concern is how real estate tech profiles apartment and\nmortgage loan applicants. Are apps, at least in some situations, having\nracially skewed effects? Can the slant be changed to better fit fair housing\nlaw and policy? These questions are now ripe.<\/p>\n\n\n\n\n\n\n\n

Emerging Issue: Algorithmic Discrimination <\/h2>\n\n\n\n

Most any prospective apartment shopper, of course, goes through background checks. And today\u2019s\u00a0mortgage apps<\/a>\u00a0scan loan applicants\u2019 financial accounts to quickly assess how much the hopeful home buyers are eligible to borrow. Both apartment property owners and mortgage companies must follow anti-discrimination laws. But what about their online screening tools?\u00a0<\/p>\n\n\n\n

In the best of scenarios, apps can make totally neutral,\nunbiased decisions. People may submit remote applications without their\nappearances being judged. They can obtain their pre-approval letters online, then\nadjust their terms and conditions, with Rocket Mortgage, Roostify, SoFi, Better.com,\nBlend.com and others. All background information is handled by the online software.\n<\/p>\n\n\n\n

What\u2019s more, a loan approval can be found online for just half\nthe price of a standard mortgage agreement. And the digital loan product is the\nsame in the end, as mortgage apps sell mortgages to banks, Fannie Mae, and the\nother usual players in the secondary loan market. Digital screeners assess\nfinancial data to discern a borrower\u2019s default risk \u2014 using criteria developed\nby the Consumer Finance Protection Bureau \u2014 the same way brick-and-mortar banks\ndo: by looking at the applicant\u2019s credit profile, debt, income and assets and so\non.   <\/p>\n\n\n\n

But the other side of this is the way tech gets in the\nmiddle, possibly shielding companies from their legal responsibility to make\nfair and equitable decisions. <\/p>\n\n\n\n

In the 2015 case Texas Department of Housing and\nCommunity Affairs v. The Inclusive Communities Project,<\/em> the U.S.\nSupreme Court said apartment applicant screening technology violates the Fair\nHousing Act if it creates discriminatory approval (\u201cdisparate impact\u201d) rates. Yet\nfaced with a recent challenge in federal district court against its tenant\nscreening tools, tech company CoreLogic claimed it is not <\/em>subject to the\nFair Housing Act because its screener doesn\u2019t actually decide who can move\nin. A human being greenlights approval based on a review of the screener\u2019s\nresults. <\/p>\n\n\n\n

Right in the middle of this tension, the Department of Housing and Urban Development is making it\u00a0harder for people to claim they\u2019re facing discrimination<\/a> due to the use of screening apps. Fair housing advocates\u00a0and\u00a0groups addressing algorithmic discrimination are alarmed. And they aren\u2019t alone. The National Association of Realtors\u00ae publicly objected<\/a>, in July 2020, that HUD changes then underway were eroding the long-standing policy of inclusivity that the Fair Housing Act stands for. NAR also observed that the problem is even worse because of Covid-19\u2019s outsized economic impacts on those coping with racial bias in many other facets of their lives.<\/p>\n\n\n\n

Home Hunting While Black: Frustration and Hope in the Digital Era<\/h2>\n\n\n\n

We\u2019ve had the Fair Housing Act since 1968. Over these five\ndecades, though, the rate of U.S. Black home ownership has hardly increased. What\u2019s\nstanding in the way? It\u2019s usually the mortgage approval process.<\/p>\n\n\n\n

In 2019, the Consumer Finance Protection Bureau<\/a> found that Black borrowers take out the smallest loans; and, moreover: <\/p>\n\n\n\n

\u201cBlack and Hispanic White\nborrowers continued to be much more likely to use nonconventional loans insured\nby Federal Housing Administration (FHA) or a guarantee from the Department of\nVeterans Affairs (VA), the Farm Service Agency (FSA), or the Rural Housing\nService (RHS) than other racial and ethnic groups.\u201d<\/em><\/p>\n\n\n\n

Why are these nonconventional loans particularly\nsought-after in minority communities? Why are conventional loans less likely to\nbe available? What underlies the loan approval obstacles? <\/p>\n\n\n\n

For one thing, the problem of race-based restrictive\ncovenants<\/a> lingers \u2014 as does the long-tail effect these clauses have\nhad across the country. In addition, fair housing advocates say government\nregulators and banks cling to assumptions and methods that should be changed to\ncreate a fairer playing field. For one thing, they believe housing applicants\nshould be able to offer a different fact set for credit scoring. For example, an\napplicant\u2019s good history of paying rent should make a difference. Credit scoring\ncompanies usually don\u2019t account for rental payments, which are the main\nfinancial obligations of most Black U.S. residents. <\/p>\n\n\n\n

Then again, could offering more fact sets create new sets of biases? Expect to see a lot of debate and study on this issue in the years ahead. One study, Consumer Lending Discrimination in the FinTech Era<\/a>,\u00a0finds reason for hope. Here are its two key findings, in the researchers\u2019 own words:<\/p>\n\n\n\n