Study Shows Age Discrimination In Lending Appears To Skyrocket. Why Are Lenders Giving Older Borrowers The Shaft?

It appears mortgage lenders are giving older Americans the shaft. A new study by the Center for Retirement Research at Boston College shows age discrimination by mortgage lenders is skyrocketing.

The study is called, “Are Older Mortgage Applicants More Likely To Be Rejected?”

The study was adapted from findings by Natee Amornsiripanitch. Amornsiripanitch is an economist at the Federal Reserve Bank of Philadelphia.

The bottom line is that whether the analysis focuses on age group or individual ages. The study found the probability of rejection of an application increases with age. This result is also surprising. This is because older borrowers have better credit score and more wealth. 

The study notes that this pattern emerges regardless of the variables. It also states that results not driven by the  COVID-19 pandemic. 

The study is quick to note lenders are not openly violating fair lending legislation.

It cites three reasons for that: 

  • First, federal regulations allow lenders to consider a borrower’s age in credit decisions under some circumstances.
  • Second, the study states that an association between age and rejection is not a causal relationship.
  • Third, “mortality risk has real economic implications for lenders, for which they might require additional collateral,” the study notes.

The study also suggests that an important omitting an important variable related to creditworthiness and age could also lead to a relationship between age and rejections. 

It continues, “Therefore, a rational and risk-averse lender should consider age-related risks when making lending decisions.”

The study states several factors suggest that age-related mortality risk could be motivating factor. 

The study concludes by stating that, “Regardless of the reason, however, it is important for older individuals to know that they are more likely to be denied credit.”

You can also read the full study here.

Read More About the Turbulent World Of Mortgage Lending On MFI-Miami.

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