Mortgage lenders are significantly more likely to deny same-sex couples a home loan and charge them more for it when they do, a new study has found.
Gay couples were 73 percent more likely to be denied a mortgage than heterosexual couples with the same financial worthiness, according to an analysis of national mortgage data from 1990 to 2015.
The study, published Tuesday in the Proceedings of the National Academy of Sciences, also found that when same-sex couples were approved for a home loan, they were given inferior terms. On average, they paid 0.2 percent more in interest and fees, which adds up to as much as $86 million a year, the researchers said in a news release.
“Lenders can justify higher fees, if there is greater risk,” said Lei Gao, an assistant professor at Iowa State University’s Ivy College of Business and co-author of the study. “We found nothing to indicate that’s the case. In fact, our findings weakly suggest same-sex borrowers may perform better.”
The researchers say their findings signal a need to include sexual orientation as a protected class under federal lending laws. The Fair Housing Act and the Equal Credit Opportunity Act prohibits discrimination against borrowers on the basis of race, color, religion, sex or national origin. They prohibit specific types of behavior, such as discouraging applicants of protected classes to apply; rejecting applicants based on those characteristics; and imposing different terms and conditions based on those traits. But, the researchers note, neither law specifically covers sexual orientation.
“Policymakers need to guarantee same-sex couples have equal access to credit,” said Hua Sun, an associate professor of finance at Ivy College of Business and the other co-author of the study. “Using our framework, credit monitoring agencies also can take steps to investigate unfair lending practices.”
Mortgage applicants are not required to disclose their sexual orientation. For the study, the researchers identified same-sex couples as co-applicants of the same gender. They said they used data of geographic distributions of LGBTQ adults from the Census Bureau and Gallup to verify their method of identification.