HMDA does not collect data on credit scores, loan-to-value, and debt-to-income on individual applicants, so an evaluation of why applicants with incomes higher than the household income were denied is difficult to assess. However, HMDA allows the lender to provide up to three reasons for the denial (in no order of preference). Based on the first reason listed (which may be deemed to be a random sample of the denial reasons), not meeting the debt-to-income (DTI) ratio was the major reason provided by lenders why applicants were denied (29 percent), followed by credit history (22 percent) and insufficient collateral or downpayment (15 percent). Not meeting the debt-to-income ratio was the major reason applications were denied across all loan types. (In this regard, Fannie Mae’s decision in July 2017 to increase its back-end DTI ratio limit from 45 percent to 50 percent is a positive move to ease the constraints for mortgage borrowers with 50 percent DTI whose risk profile is not significantly different from the risk profile of borrowers with 45 percent DTI.)
