Female mortgage applicants are significantly less likely to be approved than comparable male applicants, according to a new study of Chicago-area loan data.

The study found that not only were female applicants less likely to be approved than male applicants with similar loan-to-income ratios, but that an even greater disparity appeared when comparing female-headed joint applications to male-headed ones. Female applicants were at a significantly larger disadvantage when refinancing than compared to home purchase applications.

The study, by the Woodstock Institute, looked at Home Mortgage Disclosure Act (HMDA) data from 2010 for the six counties of the Chicago region (Cook, DuPage, Kane, Lake, McHenry, and Will). Comparisons were based on borrowers with similar loan-to-income ratios as a way of assessing affordability.

Female-headed households at a distinct disadvantage

The results showed that female applicants were 8 percent less likely than comparable males to be approved for a home purchase mortgage. Furthermore, females were 21 percent less likely to be approved for a refinance.

The differences were even more pronounced when comparing joint applications headed by females versus joint applications with a male as the lead applicant. Female-headed applications were 24 percent less likely to be approved for home purchases and 39 percent less likely to be approved when refinancing, based on applications with comparable loan-to-income ratios.

"We would expect to see no significant difference in the origination rates for male-headed joint applications and female-headed joint applications, since the backgrounds of both borrowers on joint applications are considered by mortgage lenders," said Spencer Cowan, vice president of research at Woodstock Institute. "The fact that there are such large disparities raises troubling questions about potentially discriminatory underwriting."

Racial factors also seen

Racial disparities were found as well. The greatest differences were found between African-American male and female applicants. African-American females were found to be 39 percent less likely to be approved for a purchase mortgage and 44 percent less likely to be approved for a refinance than African-American males with similar loan-to-income ratios.

The report notes that women are more likely to be custodial parents than men, which increases their financial burden and makes it more difficult to save up for a down payment. Census data shows that single women with children tend to have far less accumulated wealth than single men with children, which would affect their ability to afford a home. However, that doesn't explain the disparity in refinancing, where cash reserves are less of a factor than accumulated home equity.

Published on March 13, 2013