Research Report Reducing the Black-White Homeownership Gap through Underwriting Innovations
The Potential Impact of Alternative Data in Mortgage Underwriting
Jung Hyun Choi, Michael Stegman, Laurie Goodman, Janneke Ratcliffe, Rita Ballesteros, Liam Reynolds, Caitlin Young, Daniel Pang, Karan Kaul
Display Date
Download Report
(676.92 KB)

This report contributes to a growing conversation about alternative data in mortgage underwriting and the potential racial equity implications of their inclusion. To survey the current industry landscape, we reviewed the literature and interviewed stakeholders working on this issue. We also analyzed data to better understand how Black households could benefit from better adoption of alternative data, specifically rental payment history. Alternative data are an effective supplement to the information currently used in most credit scoring and underwriting models but could reflect underlying income and asset disparities. Despite these concerns, our research shows that including positive alternative data in underwriting is a step toward closing the Black-white homeownership and wealth gaps. To improve Black homeownership outcomes, many housing finance actors will need to rally the will to make necessary changes and ensure their services equitably reach all potential borrowers. The report examines two methods for incorporating this data into underwriting and makes recommendations to advance adoption.

Research Areas Housing finance Economic mobility and inequality
Tags Housing finance data and tools Housing finance reform Racial inequities in economic mobility Racial barriers to housing Racial homeownership gap
Policy Centers Housing Finance Policy Center
Research Methods Data analysis Qualitative data analysis