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So now our algorithms are racist? Builders struggle + NEWS 🎙

By August 26, 2021 No Comments

The latest lending discrimination targets our mortgage algorithm

The latest claim against the mortgage industry takes a very in-depth look at discrimination in the housing market…and it makes a very compelling point. But, not everyone agrees with the latest findings, and they’re pushing back. 

Look, there isn’t a single mortgage lender out there that believes our process for approving a home loan treats one person differently from another. 

However, that is not the narrative playing out in the press at the moment. No, not at all. At the moment, there is pressure for lenders to give more loans to minorities. 

Press reports are repeatedly cited instances where discrimination impacted minority home purchases, with a popular thread being the blacks have whites pose for them in order to avoid bad appraisals.

But here’s the latest attack. This article in The Markup is titled: “The Secret Bias Hidden in Mortgage-Approval Algorithms.”

And here is their claim:

“Holding 17 different factors steady in a complex statistical analysis of more than two million conventional mortgage applications for home purchases, we 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. Lenders were 80 percent more likely to reject Black applicants than similar White applicants. These are national rates,” the article states.

“In every case, the prospective borrowers of color looked almost exactly the same on paper as the White applicants, except for their race,” the authors conclude.

And here is their research.

The American Bankers Association is officially crying foul on the report and took issue with their methods and results. Here’s their full statement in defense of the industry.

And here is the Mortgage Bankers Association’s statement in full:

“The issue of fair lending is an important one, and MBA has and will continue to advocate for policies and practices that ensure lenders responsibly offer credit to all qualified borrowers regardless of the color of their skin. The issues around the lack of affordable housing and the Black homeownership gap are real, and our members are committed to doing all we can to address them.

“From the beginning, we explained to The Markup that its analysis of HMDA data, and its pre-determined conclusions regarding mortgage lending, fail to take into consideration several key components that form the backbone of lending decisions, including a borrower's credit score and credit history. As we told the authors, the Federal Reserve, the CFPB, and other regulators have been clear that denial disparities in the HMDA data alone cannot be used to assess fair lending. True fair lending examinations include a much richer set of information regarding loans and borrowers.

“We also informed the authors upfront that by limiting their analysis to only “conventional” loans, they would be painting an incomplete picture of the lending environment by purposely excluding mortgages guaranteed by government agencies like the Federal Housing Administration (FHA) that are designed to help borrowers with lower credit scores and small down payments. 

“Reporting such as this, which is not only deeply flawed but clearly biased in its premise, harms the matter at hand because it misrepresents the problems and solutions needed to solve the very serious issues that result in unequal outcomes related to Black homeownership and wealth-building.”

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New home sales inch up but homebuilders are still struggling

New home sales ticked higher in July while prices climbed to another record high, according to data released Tuesday by the Census Bureau.

Sales of new single-family homes rose 1 percent in July to a seasonally adjusted annualized rate of 708,000, rising from 701,000 in June. The median sale price for a single-family home rose to $390,500, and the average price reached $446,000 — each a new record.

“Despite a surge in home prices to record levels, new home sales eked out a small gain in July,” wrote Nancy Vanden Houten of Ox

ford Economics in a Tuesday analysis. “While demand for new homes remains strong, high prices and backlogs in construction will temper sales in the months ahead,” she added.

A surge of demand for new homes unleashed by the coronavirus pandemic drove both sales and prices to staggering levels in 2020. Sales cooled off slightly this spring as prices continued to surge, but a severe lack of inventory and building supply backlogs have kept costs for new very high.

Meanwhile, homebuilders are continuing to struggle, as seen with Toll Brothers earnings this week.

While the company missed the consensus estimate, orders reached a record for Toll’s fiscal third quarter, according to the statement.

In value, orders jumped 35% from a year earlier, reflecting the company’s ability to push prices higher. 

The company’s adjusted gross margin on home sales in the quarter was 22.7%, up from 21% a year earlier. Toll’s wealthy customer base isn’t as constrained by the shortage of homes to buy in the U.S.

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More Rise&Shred news in brief

Here’s the latest mortgage market developments from across the desk of Rise&Shred!

—-> Kukun, the largest originator of individual home data and predictive analytics, provides home investment advice to millions of customers every year via and through partnerships with many of the largest banks in America. 

Today, Kukun expands their iHome product line with iHomeManager which is available for homeowners at no cost.

iHomeManager is a home investment dashboard featuring a suite of products that make it easy to make the best financial decisions to increase the value of a home, all while living well. Customers can view their most recent home value each month, and manage that value with repairs and upgrades.

—-> Goldman Sachs will require all employees to be vaccinated by Sept. 7, or will forbid them from working in the office, according to a memo obtained by The Post.

The move comes after CEO David Solomon called all workers back to the office by June, saying work-from-home policies were an “aberration.”

But now, employees who refuse to get the COVID shot will be forced to work from home, banned from all of Goldman’s US offices. There will be no exemptions for religious or health reasons, according to the memo.

—-> All 50 states are seeing jobless claims decrease.

Unemployment rates were lower in 17 states and the District of Columbia and stable in 33 states in July 2021. All 50 states and the District had jobless rate decreases from a year earlier. The national unemployment rate, 5.4 percent, declined by 0.5 percentage point over the month and was 4.8 points lower than in July 2020.

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