Home-loan denial rate rose in 2006: report

WASHINGTON (Reuters) - More Americans had their home loan applications turned down in 2006 than a year earlier, although the majority continued to be approved, according to a report issued on Wednesday by financial sector regulators.

"Overall, the denial rate for all home loans in 2006 was 29 percent compared with 27 percent in 2005," a report by the Federal Financial Institutions Examination Council (FFIEC) said.

Nearly 8,900 lenders accounting for about 80 percent of home lending nationwide were covered by the survey.

The FFIEC includes governors of the Federal Reserve as well as the Federal Deposit Insurance Corp., National Credit Union Administration, Comptroller of the Currency and Office of Thrift Supervision.

They gather information that lenders are required to disclose under terms of the Home Mortgage Disclosure Act (HMDA) and analyze it to determine fair lending laws are met including requirements that lenders not discriminate by race.

In 2006, denial rates were generally higher for refinancings and for home-improvement loans than for home purchases, the FFIEC said. It attributed the difference to the fact that consumers buying homes faced more counseling and prequalification so that they were already screened before the loans were issued.

It also said denial rates were lower for government-backed loans than they were for so-called conventional loans, but were "especially high" in the case of applications to buy manufactured homes.

The FFIEC said that in 2006, as in the two prior years, black and Hispanic borrowers were more likely, and Asian borrowers less likely, to be offered higher-priced loans and that held true for both refinancings and home-purchase loans.

It found little difference in loan prices by gender.