According to a study released by researchers at the University of California, Berkeley, titled "Consumer-Lending Discrimination in the Era of FinTech," online banking algorithms are also discriminating against borrowers based on the color of their skin.
The study which collected data on nearly 2,000 large mortgage lenders over a six year period indicates Latino and African American borrowers pay an average of 5.3 basis points in additional interest.
Researchers reported this disparity could cause minority borrowers to pay several hundred dollars more in prepaid interest, but it's not clear how the algorithms used are creating this issue.
The study said Latino and African-American borrowers pay between $250 million and $500 million extra in mortgage interest annually.
Study co-author, Associate Professor Adair Morse, told News 5 the research is already getting the attention of lawmakers and the banking industry, which are looking into possible solutions.
Morse told News 5 the silver lining in the study is that the issues with the online algorithms are not having an impact when it comes to decisions on whether these loans are being accepted or rejected.
Former Cuyahoga County Treasurer Jim Rokakis said he's hoping the study will be an excellent road map in guiding lenders toward a solution.
"So as we learn about technology, it's not perfect, they have to keep working at it, Rokakis said.
"I think the study points out the flaws."
"Rocket Mortgage wants the application to be put together quickly, decisions to be made quickly, and to do that they have to have certain key economic factors to be brought into this process. Unfortunately it doesn't bode well for people of color."
"And we're not talking about major tweaks here, we're talking 6 to 9 basis points, so they're getting close."
"I bet they can fix it, if they want to."
News 5 made multiple attempts to reach Quicken Loans to get its comments on the study, but so far we have not been give a response.
