New study shows LGBTQ couples get lower mortgage approval rates, higher fees
AMES, Iowa — A study from Iowa State University’s Ivy College of Business has found that lenders are less likely to approve mortgages for same-sex couples.
According to a press release on Tuesday, researchers analyzed national mortgage data from 1990 to 2015 and found the approval rate for same-sex couples was 3 to 8 percent lower then heterosexual couples. The study also included a smaller dataset with more detail about applicants’ work history and credit worthiness. Based on this data, same-sex applicants were 73 percent more likely to be denied than heterosexual couples. If they were approved, they paid more in interest and fees.
Study co-authors Hua Sun and Lei Gao, associate and assistant professors of finance, respectively, say the difference in finance fees averaged less than .5 percent, but combined added up as much as $86 million annually. The research, published by the Proceedings of the National Academy of Sciences, found that same-sex couples were not at higher risk of default
“Lenders can justify higher fees, if there is greater risk,” Gao said in the press release. “We found nothing to indicate that’s the case. In fact, our findings weakly suggest same-sex borrowers may perform better.”
The researchers said the study shows a need for legal protection. The Fair Housing and Equal Credit Opportunity acts prohibit discrimination based on a borrower’s race, gender, marital status or religion, but neither specifically lists sexual orientation.
Previous research had shown that recent home purchases or refinancing in a neighborhood can predict defaults, which influences mortgage lending approval and interest rates. To determine if the percentage of LGBTQ individuals living in a neighborhood contributed to the disparity in approval rates, Sun and Gao looked at county-level percentages of same-sex applicants each year. In neighborhoods with more same-sex couples, both same-sex and different-sex borrowers seem to experience more unfavorable lending outcomes overall. The researchers say the findings should raise enough concern to warrant further investigation.
“Policymakers need to guarantee same-sex couples have equal access to credit,” Sun said. “Using our framework, credit monitoring agencies also can take steps to investigate unfair lending practices.”