Same-sex couples applying for a mortgage face higher rejection and worse rates, study finds

[mahatmakanejeeves]

Source: Washington Post

Business
Same-sex couples applying for a mortgage face higher rejection and worse rates, study finds

By Hamza Shaban
April 17 at 8:51 AM

Mortgage lenders are significantly more likely to deny same-sex couples a home loan and charge them more for it when they do, a new study has found.

Gay couples were 73 percent more likely to be denied a mortgage than heterosexual couples with the same financial worthiness, according to an analysis of national mortgage data from 1990 to 2015.

The study, published Tuesday in the Proceedings of the National Academy of Sciences, also found that when same-sex couples were approved for a home loan, they were given inferior terms. On average, they paid 0.2 percent more in interest and fees, which adds up to as much as $86 million a year, the researchers said in a news release.

“Lenders can justify higher fees, if there is greater risk,” said Lei Gao, an assistant professor at Iowa State University’s Ivy College of Business and co-author of the study. “We found nothing to indicate that’s the case. In fact, our findings weakly suggest same-sex borrowers may perform better.”
....

Hamza Shaban is a technology reporter for The Washington Post. Previously, he covered tech policy for BuzzFeed. Follow https://twitter.com/hshaban

Read more: https://www.washingtonpost.com/business/2019/04/17/same-sex-couples-applying-mortgage-face-higher-rejection-worse-rates-study-finds/

[irisblue]

1. Suprise!

[ToxMarz]

2. I don't neccessarily accept their study based on what is being reported

Being in the real estate business for 35+ years (and gay)

Problems

1: The method they used to identify same sex couples (since this is not asked or disclosed on a mortgage application)

From the study

We propose a method to infer people’s sexual orientation indirectly through gender disclosure of the borrower and co-borrower in a mortgage.

That would be any two buyers who were the same sex (ie same sex couples, friends, relatives, business partners etc) and assume they are a same sex couple


Two ways for multiple person to take title is Tenants in Common (married) or Joint Tenants (multiple owners not married). Joint Tenants is considered a "group loan" and typically allow up to four borrowers


2: In the mortgage industry standard practice is:

group loans are a riskier type of loan. They often come with higher down payments and higher interest rates. They can also be harder to secure, as banks also impose stricter guidelines...

So their findings in practice for mortgages prior to gay marriage legalization, and still with mortgages to unmarried gay couples, may be accurate, it does not extrapolate from THIS study that it is same sex couples per se that are being given worse mortgage terms. It may or may not be the case, but this study does not even effectively measure that, it just supposses that is what's happening.

[mahatmakanejeeves]

3. Thanks for the insight. NT

[melm00se]

5. Your point #1

indicates as a serious methodological flaw in the study and, in my mind, immediately calls into question their conclusions and recommendations.

[yardwork]

6. Very good points.

[SharonClark]

8. Excellent points.

[cinematicdiversions]

9. Thank you for this.

I was very puzzled how the mortgage company would even know it was a same-sex couple.

[rkleinberger]

4. The study should only look at married same-sex couples as compared to married opposite sex couples.

That would be more valuable. Unmarried couples can pose a risk to home ownership due to potential instability of the household.

[Honeycombe8]

7. That's not enough to determine if the rates & turn-downs are because of same-sex buyers....

More information would be needed.

The people in that group also belong to other groups, like we all do.

What was the average credit score, compared to the control group?
What was the length of credit, compared to the control group?
Were the properties all going to be homesteads? Or were some vacation or second properties?
What were the employment histories of this group, compared to the control group?
Was the mix of male and female comparable to the control group? (half same-sex males, half same-sex females, for example. Since it is possible that gender alone makes a difference. There is a history of that, in our country.)
Was the mix of race and ethnicity comparable to the control group?


There are all sorts of reasons that one group may have a higher rejection rate than a control group. There would have to be something to indicate the reason for that group's higher rejection rate, other than picking out one thing about that group and surmising it must be that. It could be, for example, that the group was younger than the control group, and therefore had a shorter employment history. Or it could be that the group had 10 points lower in the average credit score.

More information would be needed.