Online Mortgage Lending Creates Challenge for Regulators to Track Racial Discrimination

As the housing market continues to rebound from recession, Bay Area cities are working to combat discriminatory lending practices that make it difficult for minorities to buy a home. Local governments that receive federal housing dollars are required to monitor mortgage data and flag any racial disparities. But an NBC Bay Area analysis found that one of the most important tools used by regulators to identify discrimination may not be as helpful as it once was.


When you apply for a home loan, banks are required to collect demographic information, including race and gender, as part of the Home Mortgage Disclosure Act (HMDA). Congress enacted HMDA in 1975 to prevent lenders from discriminating against minority applicants.

For longtime Richmond resident Megan Roberts, diversity is an important part of her community.

“I wanted to live in a neighborhood that is diverse both ethnically and also economically,” Roberts said.

Last winter, she decided to refinance her mortgage through Quicken Loans. A loan officer filled out Roberts’ application over the phone, including the section asking about her race.

“At that point, I said it’s really important that you record this correctly,” she said. “Make sure you put down that I’m white. I was very specific about that.”

However, when Roberts received a copy of her loan application in the mail, it stated she did not wish to provide her race.

"I don’t know how he possibly could have [marked the wrong box] when I said it’s really important you record me as white,” Roberts said, fearing the mistake may have been intentional. “If they change all the white people to 'do not report' the percentages for everybody else looks better. That just really bothered me.”

Quicken Loans assured Roberts the miscommunication was an honest mistake and fixed it immediately. But the NBC Bay Area Investigative Unit wanted to know how often lenders are reporting that applicants do not wish to report their race.


NBC Bay Area analyzed HMDA data for all mortgage applications in California from 2010 to 2016, the most recent year on record.

During that time, a steady 14 percent of all applicants did not disclose their race on their mortgage application. At Wells Fargo, the state’s biggest lender, around 10 percent of applicants did not provide their race.

But at Quicken Loans, those numbers have seen a sharp spike in recent years. In 2016, 42 percent of all applicants declined to provide their race information. That’s nearly three times the state average.

Peter Smith, a senior researcher at the Center for Responsible Lending, uses HMDA data to analyze predatory lending practices against minorities. He says borrowers have the right to conceal their race as some applicants may fear that revealing that information could hurt their chances of approval. Still, Smith said the numbers NBC Bay Area found for Quicken Loans sound unusually high.

“When we see larger sets of borrowers failing to report their race, I wonder if there are structural issues, whether it’s a loan officer in particular, or an operation that is not asking [for race data] in a particular way,” Smith said. “It raises a bit of a red flag for me.”


Quicken Loans’ popular Rocket Mortgage product helped the company soar past its competitors, becoming the nation’s largest lender. Potential homebuyers can fill out an application in just minutes. But that convenience may come at a cost.

Under current lending regulations, if a client applies for a mortgage at his local bank, but chooses not to provide his race, the loan officer is required to report the first impression of the customer based on observations like skin color, accent, or name. It’s not ideal, but the requirement allows applicants to maintain their privacy, while still allowing regulators to monitor trends.

But Quicken Loans clients fill out their applications over the phone or online, so if the applicant clicks the box “let’s move on” the loan officer does not have to report anything to the government.

Smith worries that as more lenders move online, demographic data will continue to disappear and it will become more difficult to detect discrimination.

A spokesperson for Quicken Loans told NBC Bay Area that its HMDA data is based only on the information clients share and that its lending practices are fair.

In a statement the company said, “If clients decline to provide the information, we mark it down as such. When a lender is unaware of a client’s ethnicity, it is impossible to make a lending decision based on anything but the credit profile.”


Laura Simpson, the City of Concord’s Planning and Housing Manager, works with housing directors throughout Contra Costa County to provide fair housing for residents. A 2016 report by the Contra Costa County Home Consortium noted a disturbing pattern: black applicants with high incomes were more likely to be denied home loans than white applicants with lower incomes. Simpson says their analysis may not have been possible without HMDA data.

“[Without race data] it is harder for us to determine who is receiving loans and who is being denied loans.” Simpson said. “It is harder to [identify] if there is unequal treatment. 

Roberts, the Richmond homeowner, says as soon as she noticed the error in her application she called Quicken Loans. The company said a loan officer accidentally marked the wrong box and quickly corrected the mistake. Roberts was able to close on the loan the following week.

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