Mortgages and Discriminations – Green is the only color that should matter!

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Although everybody’s money looks green, there are lots of voices that make accusations of discrimination in mortgage approval.

The starting point of the debate seems to be the fact that the positive estimates for an increase in the minority share on the mortgage market have so far been contradicted by the current decline in the percentage of minority home loans (the decrease has been more significant in the African-American population). Lenders may have to drop their credit standards in order to actually encourage sales.

Yet, a real improvement of the mortgage market ought to go in two different directions, on the one hand to teach homebuyers to meet credit guidelines (i.e. spend less, save more) and on the other hand loosen the lending standards to a normal pre-collapse level. Some analysts point to the fact that the lending standards were very tight prior to the housing crisis of 2008 and the market is now loosening towards normality.

Discrimination happens in the mortgage industry whenever a qualified candidate is denied a mortgage. Some bankers eloquently explain that in this industry, discrimination occurs not based on ethnicity, race or gender criteria but rather on debt-to-income ratios and credit scores. These are the factors that they work on and based on which lenders actually “discriminate”.

No doubt that if prospective buyers can be trained to meet the standards of the industry, issuing and handling mortgages will be a lot easier. Green is indeed the color that matters, yet it’s not the only color. Discrimination exists and turning a blind eye to it could actually make us blind!

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