In Cambridge, Black and Latinx Borrowers Face Higher Mortgage Loan Denial Rates, June Report Reveals

Black and Latinx borrowers faced significantly higher mortgage lending denial rates in Cambridge and in Massachusetts broadly in 2021, according to a June 2023 report.

Published by the Woodstock Institute and the Partnership for Financial Equity, the June report analyzed 2021 Massachusetts data from the Home Mortgage Disclosure Act, coming as the latest installment of an annual report examining financial opportunity in Massachusetts.

According to the report, Black borrowers in Cambridge faced a 17.7 percent denial rate from banks and state-chartered credit unions and a 22.7 percent denial rate from non-bank licensed mortgage lenders — more than twice and quadruple the rates at which these institutions deny white borrowers, respectively.

The report revealed similar disparities faced by Latinx borrowers, who saw an 18 percent denial rate by banks and credit unions — a relatively high percentage compared to the 4.2 percent by licensed mortgage lenders.

The racial disparities in mortgage loan approval in Cambridge reflect broader trends in Massachusetts, where Black applicants face a 26.3 percent denial rate while white applicants face an 11.2 percent denial rate by banks and credit unions, according to the same report.

City of Cambridge spokesperson Jeremy C. Warnick did not respond to a request for comment on racial disparities in mortgage lending.

The Home Mortgage Disclosure Act was passed in 1975 to help combat redlining — a discriminatory housing practice in which banks largely refused to refinance the homes of Black residents, purportedly due to neighborhood risk factors.

Samuel M. Gebru, a professor of the practice of political science at Tufts University, said the June report was “not surprising at all” for those who are “aware of the systemic structural challenges of being a person of color in America.”

“These challenges are persistent, and they’re historic. And so these numbers add up. In fact, they may be a little bit better than what I was assuming initially,” Gebru said.

Gebru described the need for policy solutions in response to the city’s racial disparities in mortgage and appraisal lending.

“It is definitely an issue that needs to be addressed through policy,” Gebru said. “These structural challenges are created through what I call policy violence, and it’s going to take public policy to undo them, just as it took public policy to create them in the first place,” he added.

According to Gebru, these policy solutions would include enforcing federal and state anti-discrimination laws, increasing access to education — for example, in cases where individuals facing evictions are not aware they can have an attorney — and supporting community development financial institutions, which are specialized organizations that help finance low-income and other underserved borrowers.

Beyond policy changes, government officials in Cambridge have sought to educate residents about how to identify cases of housing discrimination.

Carolina Almonte, the acting executive director for the Cambridge Human Rights Commission, said the commission regularly runs webinars focused on mortgage appraisal discrimination.

“Basically, we talked about what the challenges are that members of our community — and just, you know, throughout the US — may be facing regarding appraisal and lending discrimination,” Almonte said.

“We want to make sure to educate our community members about rights that they have,” Almonte added.

Almonte stressed the importance of sending a complaint to the Human Rights Commission in cases of suspected discrimination.

“We do hope people know that we’re a resource if you do feel like you’ve experienced unequal treatment during the application process or if you got a higher interest rate without a clear justification,” Almonte said.

—Staff writer Erika K. Chung can be reached at erika.chung@thecrimson.com. Follow her on X @erikakychung.

—Staff writer Emily L. Ding can be reached at emily.ding@thecrimson.com. Follow her on X @emilylding.