US mortgage approval algorithm more likely to reject people of colour

US mortgage lenders were much more likely to turn down Latino, Asian, Native American and Black applicants than White ones, according to an investigation. An assessment o f mortgage data by The Markup , co-published by the AP , dis covered that mortgage loan applicants of colour were 40-80 percent more likely to be denied than their White counterparts across the US, and that the disparity was greater than 250 percent in some urban areas. The complex statistic analysis of more than two million conventional mortgage applications for home purchases found that lenders were 40 percent more likely to turn down Latino applicants for loans, 50 percent more likely to deny Asian/Pacific Islander applicants, and 70 percent more likely to deny Native American applicants than similar White applicants. The investigation also found that lenders in 2019 were more likely to deny home loans to people of colour than to white people with similar financial characteristics. The algorithms used by lenders were mostly mandated and mortgage applications approved by Freddie Mac and Fannie Mae, whose own automated underwriting algorithms are a closely held secret. The findings suggested that the re was a hidden bias in mortgage-approval algorithms, leading to significant racial disparities in loan approvals. System 🤖 Classic FICO Score Operator: Freddie Mac; Fannie Mae Developer: Freddie Mac; Fannie Mae Country: USA Sector: Banking/financial services Purpose: Assess mortgage applications Technology: Underwriting algorithms Issue: Bias/discrimination ; Transparency Resource s 📃 https://www.documentcloud.org/documents/21011405-mortgage-bankers-trade-groups-letter-to-cfpb-10-29-14 https://www.documentcloud.org/documents/21010234-cfpb-final-policy-guidance-disclosure-of-loan-level-hmda-data Timeline ⏰ February 2024. T he Markup 's investigation was cited by Senator Ron Wyden as a reason for the introduction of the US Algorithmic Accountability Act of 2022. I nvestigations, assessments, audits 👁️ The Markup . The secret bias in mortgage approval algorithms The Markup . Dozens of mortgage lenders showe d significant disparities. Here are the worst The Markup . How we investigated racial disparities in federal mortgage data

Date it happened

2021-08-01

Organisation involved

Freddie Mac; Fannie Mae

This is a record of what was reported, not a finding that anyone broke the law. If it names your organisation and you believe it is wrong, the corrections process is free and open to everyone.