Missing From the Refinancing Boom: Black Homeowners

Summary

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WSJ Your Money Briefing

Episode: Missing From the Refinancing Boom: Black Homeowners

Date: June 24, 2021
Host: Charlie Turner
Guest: J.J. McCorvey, WSJ Reporter

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Overview

This episode addresses a striking disparity in the 2020 mortgage refinancing boom: Black homeowners were largely left out, missing out on billions in potential savings. Host Charlie Turner talks with WSJ reporter J.J. McCorvey to unpack the causes behind the racial gap in refinancing rates, the consequences for Black families, and emerging policy responses aimed at creating a more equitable housing market.

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Key Discussion Points & Insights

The 2020 Refinancing Boom: Who Benefited?

• [00:37, 01:59] Context:
  During the pandemic, historic lows in interest rates triggered a wave of mortgage refinancing.
  • “Eight million people refinanced last year, according to Freddie Mac.”—Charlie Turner [01:59]
• Disparity in Savings:
  Black households accounted for only a small fraction of the savings.
  • “Of an estimated $5.3 billion in savings for all households that refinance during this 10 month period that they examined in the report, only 198 million, or 3.7%, went to black households. And that is a very, very, very small piece of the pie.”—J.J. McCorvey [03:12]

The "Why": Barriers to Refinancing

• Structural Barriers:
  • Closing costs and fees act as significant deterrents.
    • “The closing costs associated with refinancing average about $5,000, according to Freddie Mac. But that’s also…title insurance and origination fees, and that can also get rolled into the new mortgage terms. And experts…talked about how the larger that gets, the more likely it is for it to start eroding the benefit of refinancing in the first place.”—J.J. McCorvey [03:39]
• Negative Cycle for Black Households:
  • The pandemic led to disproportionate financial hardship among Black and Latino homeowners.
    • “So, for example, one of the researchers of the Fed report…found that among borrowers who were current on their mortgages as of February 2020, 15.6% of Black borrowers missed at least one payment by February of this year, compared with 6.5% of white borrowers. …when you miss a mortgage payment [you are] more likely…to go into forbearance. And then borrowers who enter forbearance are then ineligible for mortgage refinancing. So it just kind of creates this cycle.” —J.J. McCorvey [04:29]
• Home Value and Historic Discrimination:
  • Undervaluation of Black-owned homes creates additional reluctance to refinance.
    • “Black owned homes were undervalued by $48,000 on average, and that results in a cumulative loss of $156 billion.”—J.J. McCorvey [05:28]
  • Longstanding mistrust of financial institutions due to redlining and discrimination.
    • “Many minority families…have developed this really strong wariness of the country’s housing and banking infrastructure, and that results in this hesitancy to apply for programs that might benefit homeowners.”—J.J. McCorvey [06:48]

Broader Economic and Social Context

• Intersecting Inequities:
  • The refinancing gap exacerbates existing racial disparities in homeownership and wealth.
    • “And this comes on top of a long standing and well documented racial gap in homeownership in general.”—Charlie Turner [05:23]

Policy Responses & Possible Solutions

• Recent Federal Initiatives:
  • The Biden administration has announced actions targeting housing equity.
    • “For example, there was a new $10 billion community revitalization fund…$15 billion in grants to support the planning, removal, retrofitting of existing transportation infrastructure…a new neighborhoods home tax credit to invest in the building of affordable homes for low and moderate income home buyers and homeowners.”—J.J. McCorvey [06:52]

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Notable Quotes & Memorable Moments

• "Of an estimated $5.3 billion in savings for all households that refinance during this 10 month period...only...3.7% went to black households. And that is a very, very, very small piece of the pie."
  — J.J. McCorvey [03:12]

• “The closing costs associated with refinancing average about $5,000...the larger that gets, the more likely it is for it to start eroding the benefit of refinancing in the first place.”
  — J.J. McCorvey [03:39]

• “Black owned homes were undervalued by $48,000 on average...a cumulative loss of 156 billion.”
  — J.J. McCorvey [05:28]

• “Many minority families…have developed this really strong wariness of the country’s housing and banking infrastructure, and that results in this hesitancy to apply for programs that might benefit homeowners.”
  — J.J. McCorvey [06:48]

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Timestamps for Key Segments

• [00:37–01:11] — Intro to refinancing boom & initial data
• [01:59–03:12] — Disparity in refinancing rates and savings by race
• [03:30–04:25] — Barriers to entry: closing costs and process
• [04:25–05:23] — Pandemic’s financial impact and forbearance cycle
• [05:23–06:48] — Home value, mistrust, and broader legacy of discrimination
• [06:52–07:38] — Federal policy responses and initiatives

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Conclusion

This episode shines a light on the inequities that kept Black homeowners from fully participating in the 2020 refinancing surge. With billions in lost potential savings, the discussion unpacks both immediate barriers—like high costs and eligibility requirements—and the deeper roots in undervaluation and systemic mistrust. The podcast closes by noting recent federal steps toward addressing these structural differences in the housing market.

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Transcript

[Small Business Owner]

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[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[Charlie Turner]

Here's your money briefing for Thursday, June 24th. I'm Charlie Turner for the Wall Street Journal filling in for J.R. whalen. Last year, millions of American homeowners took advantage of low interest rates to refinance their mortgages. But black households were largely left out of the refinancing boom of an estimated

[J.J. McCorvey]

$5.3 billion in savings for all households that refinance. During this 10 month period, only 198 million, or 3.7%, went to black households. And that is a very, very, very small piece of the pie.

[Charlie Turner]

Coming up, our reporter JJ McCorvey will discuss why so few black homeowners renegotiated their mortgages. That's after the break.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[Charlie Turner]

2020 was the year of the pandemic, but it was also the year that millions of Americans chose to refinance their mortgages. Eight million people refinanced last year, according to Freddie Mac. However, not everyone caught the refinancing wave. From January to October of last year, only 6% of black homeowners refinanced their mortgages from versus 12% of white borrowers, according to a new Federal Reserve report. Let's explore some of the reasons for these disparities with our reporter JJ McCorvey. JJ, thanks for coming on the show.

[J.J. McCorvey]

Hey, Charlie, thanks for having me.

[Charlie Turner]

J.J. before we get into this racial gap, let's take a step back. Why did so many people refinance their mortgages last year? What are the benefits of refinancing?

[J.J. McCorvey]

Yeah, so interest rates reach historic level, low levels during the pandemic, and that combined with people spending more Time at home led millions to renegotiate the terms of the markets just to try to get locked into lower rates.

[Charlie Turner]

Right. And the savings from refinancing can be significant. Freddie Mac estimates doing so could save nearly half of black and Latino households about $1,200 a year. And yet we saw fewer black households refinance last year. What kind of impact does the Fed say that'll have?

[J.J. McCorvey]

So, of an estimated $5.3 billion in savings for all households that refinance during this 10 month period that they examined in the report, only 198 million, or 3.7%, went to black households. And that is a very, very, very small piece of the pie.

[Charlie Turner]

Okay, let's talk about what's behind this racial gap in refis. Jj, is there something about the refinancing process that's contributing to this?

[J.J. McCorvey]

Yeah, there's a barrier to entry to refinancing, which is that closing costs and things like that lead to people not wanting to refinance. America's most common home loan is the third year fixed mortgage, which requires going through the refinancing process to take advantage of lower rates. And the closing costs associated with refinancing average about $5,000, according to Freddie Mac. But that's also, you know, kind of digging into that a bit more. You know, there's also title insurance and origination fees, and that can also get rolled into the new mortgage terms. And experts I spoke to talked about how the larger that gets, the more likely it is for it to start eroding the benefit of refinancing in the first place.

[Charlie Turner]

What about the broader economic effects? Did the Fed say that's playing a role?

[J.J. McCorvey]

Yeah. So as the Journal has reported a lot over the past year and a half, the pandemic has had a. A disproportionate effect economically on black and Latino households, which of course affect employment and finances. So, for example, one of the researchers of the Fed report, Lauren Lambie Hanson, she and her team found that among borrowers who were current on their mortgages, as of February 2020, 15.6% of Black borrowers missed at least one payment by February of this year, compared with 6.5% of white borrowers. And, you know, that's not really surprising when think of, you know, how the economy affected unemployment. And that made it more likely when you miss a mortgage payment to go into forbearance. And then borrowers who enter forbearance are then ineligible for mortgage refinancing. So it's just kind of creates this cycle.

[Charlie Turner]

And this comes on top of a long standing and well documented racial gap in homeownership in general.

[J.J. McCorvey]

Yeah. One of the reasons experts say that some people don't want to refinance is that black owned homes are undervalued. And sometimes when you get a decent rate with your mortgage, you don't want to go through the refinancing process because you might get the appraisal and find out that your home is not worth what you thought it would be or what it should be. So research from the Brookings Institute found that black owned homes were undervalued by $48,000 on average, and that results in a cumulative loss of 156 billion. I also want to talk about the broader effect of the legacy of discrimination against minorities in the financial system from redlining, which can include denying or limiting financial services based on race. You know how that can discourage people from calling lenders and asking about refinancing options in the first place or try to push for better rates. Is this kind of sentiment where it's like, well, I don't want to rock the boat. You know, I got in, I got my home, I got my rate. I don't want people scrutinizing my credit again or, you know, potentially undervaluing my home. And then many minority families just have developed this really strong wariness of the country's housing and banking infrastructure, and that results in this hesitancy to apply for programs that might benefit homeowners.

[Charlie Turner]

So, JJ are there any plans in the works to address these inequalities in the housing market?

[J.J. McCorvey]

Yeah. So, earlier this month, we saw the Biden administration announce the set of interagency efforts to address inequities in the housing industry. For example, there was a. A new $10 billion community revitalization fund to support infrastructure projects to kind of spark economic activity in black communities, build community wealth. $15 billion in grants to support the planning, removal, retrofitting of existing transportation infrastructure, community connectivity, mobility, economic development. There's a new neighborhoods home tax credit to invest in the building of affordable homes for low and moderate income home buyers and. And homeowners. So there are some efforts underway here.

[Charlie Turner]

Wall Street Journal reporter J.J. mcCorvey. Thanks for joining us.

[J.J. McCorvey]

Thank you.

[Charlie Turner]

And that's your money briefing. I'm Charlie Turner filling in for JR Whelan for the Wall Street Journal.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.