There is a widespread perception in American culture that same-sex partners enjoy lives of comfort and affluence. A commonly held stereotype of gay couples is that they live in ritzy homes in trendy neighborhoods, and have plenty of disposable income to spend on things like expensive clothing and luxurious vacations. This perception, however, has little basis in reality. Overall, LGBTQ+ Americans are less likely to own their homes when compared to their straight, cisgender counterparts, and they are more likely to experience financial hardship.
Some new data that was recently released by the Consumer Financial Protection Bureau (CFPB) gave some insight into the discrimination faced by LGBTQ+ people, which often plays a role in these hardships. This data showed that when two men or two women apply for a mortgage loan together, they will receive, on average, higher interest rates and higher closing fees than those given to different-sex borrowers. These are signs of potential fair lending violations on the part of the banks (and other types of lending institutions) that offer these mortgage loans.
We’re only aware of these disparities because for the first time, the CFPB release of the 2018 Home Mortgage Disclosure Act (HMDA) data finally included interest rate information and loan costs. HMDA data is published yearly and provides information about the borrowers taking out mortgages or home equity lines of credit (HELOC), including addresses, loan amounts, race and the name of the financial institution providing the capital.
NCRC’s analysis found that in addition to facing higher interest rates and closing fees, same-sex borrowers were also more likely to be denied home loans, and less likely to see their applications for home purchase loans result in originations. For the purposes of the study, when two applicants identified themselves in their applications as being the same gender, they were regarded as same-sex couples. When two applicants identified themselves as a man and a woman, they were regarded as a different-sex couple.
Overall, different-sex borrowers were older and Whiter than their same-sex counterparts, so the issues of race, ethnicity and age may act to compound the discrimination to which same-sex borrowers are subjected. NCRC did not have enough information to determine whether same-sex couples received worse treatment than different-sex couples who are the same race, within the same income level and within the same age range. It appears that the difference in treatment faced by same-sex couples who seek mortgages is an example of the ways that discrimination based on sexual orientation, racism, sexism and ageism can intersect.
This HMDA data also provided evidence that female borrowers encountered discrimination based on their gender. The data showed when couples consisting of two women bought homes together, they paid higher fees on average than couples consisting of two men, regardless of race. This is an indicator of possible violations of the Equal Credit Opportunity Act (ECOA), which was drafted specifically to protect women from discrimination.
The NCRC report should be a warning to financial institutions on the need to complete a fair lending audit to determine that they are not violating fair lending laws. Gender discrimination is prohibited by both the Fair Housing Act (FHA) and ECOA. In addition, many states and counties have statutes that bar discrimination based on sexual orientation. Sexual orientation is not currently a protected class under the FHA or ECOA, but the recent Supreme Court decision in Bostock v. Clayton County recognized discrimination based on sexual orientation as a form of gender discrimination. (While the decision dealt with the definition of gender discrimination in employment cases, it is likely that its definition of gender discrimination will be found applicable to lending and housing discrimination cases as well.)
While advocates are unable to file disparate impact claims against the marketplace as a whole, they can still file claims against specific banks for their lending actions, and the disproportionate adverse effects of those actions on a protected class. This new HMDA data may pave the way for LGBTQ+ borrowers to assert their rights, as they have new insight into lending discrimination based on information that was not available to the public until now. Lending institutions would be well-advised to ensure that their lending decisions do not have an adverse effect on same-sex borrowers.
Anneliese Lederer is NCRC’s director of Fair Lending and Consumer Protection.
Jake Lilien is NCRC’s compliance program manager.