Same-sex Borrowers 73 Percent More Likely to be Denied Mortgage, Study Finds

Gay borrowers are more likely to be denied mortgage loans, and those that do get approved pay higher interest rates and fees, according to a new study from Iowa State University.

Despite being “less risky overall,” same-sex borrowers are 73 percent more likely to be denied when applying for a mortgage loan, according to the report. When they are approved, the study found they have mortgage interest rates that are 0.02 to 0.2 percent higher on average — potentially adding tens of thousands of dollars to their repayments over the lifetime of the loan.

The study, published earlier this week in the journal Proceedings of the National Academy of Sciences, suggests there may be systemic housing discrimination against gay and lesbian borrowers.

“Our investigation on mortgage performance reveals that same-sex applicants are less likely to prepay mortgages and are no more likely to default than their peers, indicating that they are less risky to lenders,” the report states. “Given the absence of evidence that suggests that same-sex status is a reliable signal for loan underperformance, potential disparate lending practices against sexual orientation might exist in the mortgage market.”



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Lei Gao, one of the study’s authors, said he became interested in the experience of same-sex borrowers in the mortgage market after observing the experience of his gay neighbors in Georgia, one of the 26 states across the United States that does not have statewide housing protections for LGBTQ people.

“Their housing purchase experience and my selling experience basically taught me about this,” Gao explained, noting that it seemed “they were treated differently than some other neighbors.”

Since mortgage applications do not ask prospective borrowers about their sexual orientation, the researchers inferred borrowers’ sexuality through the gender disclosure of the applicant and co-applicant. Their data correlated with LGBTQ population estimates conducted by Gallup and the University of California, Los Angeles’ Williams Institute.

While Gao said it may be “premature to conclude that there exists discrimination against same-sex couples” in the mortgage lending market, he said the report’s findings should “raise enough concerns and call for a further full-scale investigation.”

“The potentially existing lending discrimination might just reflect a corner of the iceberg,” he told NBC News.



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In the report, Gao and his co-authors state that their findings “have direct implications for the urgency of protecting the LGBT community regarding fair credit accessibility.”

Currently, the Fair Housing Act of 1968, federal legislation passed to end racial and religious segregation in home rentals and purchases, does not ban discrimination based on sexual orientation or gender identity. The Equality Act, a federal bill reintroduced in Congress last month, would modify the existing law to do so.

After the passage of the Fair Housing Act in 1968, racial and religious housing discrimination became illegal, but it didn’t disappear overnight. Since 1991, the Justice Department has employed “testers” to determine whether landlords, sellers and agents are discriminating against protected classes, the Justice Department writes on its website. “This information may indicate whether a housing provider is complying with fair housing laws.”