The voices of Urban Institute's researchers and staff
September 8, 2016

We’re still shortchanging women when it comes to mortgages

September 8, 2016

We’ve come a long way from the days when a single woman who wanted a mortgage had to find a man to guarantee it for her. Single female borrowers make up a significant swath of the homebuying public, comprising one-fifth of the mortgages made in 2014.

But we still have a long way to go. Though our recent analysis of how well people actually pay their mortgages reveals that female-only borrowers—a group that is disproportionately minority and lower income—are better than men at paying their mortgages, they get no price break for their superior performance. In fact, women are denied mortgages at higher rates than men despite their better track record.  

Gender Distribution of Mortgage Borrowers

Years

Female only

Male only

Male-female

Female-male

Female-female

Male-male

2004–07

23.81

30.85

36.49

6.83

0.91

1.11

2008–10

19.65

26.24

44.42

7.57

0.96

1.15

2011–14

19.47

27.89

43.33

7.41

0.89

1.00

Total

21.46

28.89

40.48

7.18

0.91

1.08

Source: Authors’ calculations based on matched HMDA and CoreLogic data.

Female-only borrowers: A higher-minority, lower-income group

Single borrowers—both male and female—are more likely than paired male and female borrowers to be minorities and to live in low-income and minority communities. They are also more likely to have high-cost mortgages and weaker credit characteristics than paired male and female borrowers. And solo female borrowers are even more likely than solo male borrowers to be minorities, live in poor and minority communities, and have weaker credit characteristics. (We found that one-third of single-women borrowers are minorities, and almost half of them live in low-income communities.)

This group of borrowers is more on the precipice financially and stands to gain tremendously from the potential benefits of homeownership. Additional—even subtle—barriers could impede their success.

Summary Borrower Statistics (2004-2014)


    Female only Male only Male-female Female-male Female-female Male-male All
FICO score   711 712 725 718 714 717 718
LTV   75.07 77.63 74.43 75.86 76.35 77.37 75.64
DTI   33.25 33.11 32.96 33.29 33.73 33.27 33.1
Loan size ($000s) 176.41 202.94 227.6 213.24 210.11 230.42 208.33
Income ($000s) 69.22 94.72 119.48 110.23 105.92 151.38 101.18
Loan size/income 2.91 2.66 2.26 2.25 2.39 2.11 2.52
Median income, tract/MSA 0.462 0.447 0.327 0.38 0.443 0.455 0.397
Area minority population >50% (%) 22.9 20.6 12 15.3 22.1 21.6 17.3
Higher-priced loan (%) 15.6 15 7.6 12.6 12.6 11 11.9
Minority borrower (%) 34.1 32.1 22.4 27.5 32.9 30.1 28.3

Source: Authors’ calculations based on matched HMDA and CoreLogic data.
Notes: LTV = loan to value; DTI = debt to income; MSA = metropolitan statistical area.

Single-female borrowers: Higher rates and higher denials

Single borrowers face higher mortgage interest rates than partnered cogender borrowers. Solo female borrowers face even higher interest rates than their male counterparts because they have weaker credit profiles and a higher percentage of higher-priced (subprime) loans.

Lenders base their decisions on credit profiles, so it makes sense that a weaker credit profile generates a higher rate; lenders charge more to protect themselves from the risk of default. Lenders rely upon these same credit profiles when approving loans, so solo female borrowers also face a higher denial rate than solo male borrowers. 

The critical issue we assessed was whether these credit profiles accurately predict risk, the likelihood that the borrower will default on the loan.  The answer is clear: in the case of solo female borrowers, the profiles don’t accurately predict risk.

Single female borrowers: Better performance

To assess whether single women and single men differ in their mortgage payment track records, we ran three different analyses using 13 million solo female and 17 million solo male borrowers. In each analysis, we held steady the credit characteristics to ensure we were comparing apples with apples: similar loan lengths, interest rates, FICO scores, and loan-to-value ratios.

In each analysis, we found that white, African American, and Hispanic solo female borrowers consistently default less than their male counterparts.

Women are paying too much for their mortgages

The bottom line: single women with mortgages are doing a better job paying their mortgages than their credit characteristics predict. Because the higher price they pay for their mortgages is based on their credit characteristics when they take out the loan, this means single women borrowers are paying too much.

This inequality does not translate into a significant amount: less than $150 per borrower per loan. The important issue, however, is that the dimensions we rely on to assess credit risk today do not adequately capture all the differences.

This omission has real consequences. Women generally are denied mortgages more often despite their superior payment performance. We need to develop more robust and accurate measures of risk to ensure that we aren’t denying mortgages to people who are fully able to make good on their payments.

In this Wednesday, March 30, 2016, photo, Kelsey Funk poses outside her home in St. Charles, Mo. Funk paid $113,000 for her three-bedroom home in suburban St. Louis about a year ago. For Funk, there’s nothing like the pride and contentment of having her own home. "Once you own, it's a totally different feeling," she said. "You actually feel like a grown-up." Photo by Jeff Roberson/AP

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