WASHINGTON, DC. - A new analysis of 2016 mortgage lending data by the Center for Responsible Lending (CRL) again finds a continued lack of access to conventional loans among consumers of color and low-wealth families, but that the mortgage market has rebounded slightly from the foreclosure crisis and Great Recession.
Enacted by Congress in 1975, the Home Mortgage Disclosure Act (HMDA) requires an annual public accounting of the nation’s mortgage lending. Its data provides critical information for both the public and financial sectors by alerting the nation to trends on the groups of Americans that are actually receiving mortgage loans from financial institutions.
Using data from the just-released 2016 HMDA report by the Federal Reserve, CRL finds that consumers of color – African-American and Hispanic Whites – received a combined 187,958 conventional loans or 9% of 2,123,000 conventional loans approved in 2016. White consumers continue to dominate the conventional mortgage market, receiving 70% of these loans or 1,490,032.
Conversely, the consumers of color also remain disproportionately dependent on higher-cost, government-backed mortgages like VA and FHA. In 2016, 324,566 non-conventional mortgage loans were approved for African-Americans and Hispanic Whites among a total of 866,000 such loans approved. White consumers received 809,400 FHA loans or 60%.
Historically in the mortgage market, 30-year, conventional loans are the most affordable and sustainable to build family wealth. Government-backed loans like VA and FHA are available with low and no down payments but come with fees and costs not reflected in conventional mortgage lending.
For the third straight year, HMDA data shows that mortgage lending overall has not been affected by lending rules like the Ability-to-Repay and Qualified Mortgages, also known as QM. Instead, lending trends show incremental increases since 2014 that signal modest growth in 2014, 2015, and again in 2016.
As overall mortgage lending gradually increases, stark racial disparities continue in the number of denials of mortgages. African-Americans still have the highest denial rate and Hispanic White applicants were also denied more often than Whites.
“It is troubling to see the continued trend of mortgage lenders abdicating their responsibility to serve the full universe of credit-worthy borrowers,” said Nikitra Bailey, a CRL Executive Vice President.
“During the financial crisis, taxpayers of all colors together paid for the bailout of banks,” continued Bailey. “Now and years later to see that African-Americans and Latinos remain overly dependent upon FHA to access mortgages is a sign of unfair treatment,” continued Bailey. “Whites continue to unfairly receive more favorable access to affordable loans, despite our nation’s fair lending laws. It is time for the prudential regulators to ensure that all lenders, both banks and non-banks, meet their duty to serve obligations and provide a more level playing field for potential homeowners.”
“As our nation becomes increasingly diverse, lingering disparities in homeownership will continue to suppress economic growth across communities that have been left out of the economic recovery,” said Sarah Wolff, a senior CRL researcher. “CRL believes that every creditworthy consumer, regardless of race or ethnicity, should be able to access mortgages and in turn, build family wealth through homeownership.”
Highlights from the 2016 HMDA data include:
- African-American borrowers received 6% of total purchase loans. Hispanic white borrowers received 8.8% of purchase loans. This marks a slight increase from the corresponding 2015 totals, shown above, but these rates continue to lag the population rates for African-Americans and Hispanic white Americans, who make up 12.7% and 11.3% of the American population, according to the US Census Bureau's 2015 American Community Survey.
- African-American borrowers received 5% of total refinance loans. Hispanic white borrowers received 6.2% of purchase loans. While these totals mark small increases since 2015, the proportion of refinance loans to African-American borrowers remained at 5%, while the proportion to Hispanic white borrowers slightly decreased from the corresponding 2015 totals.
- Low- and moderate-income borrowers received 26.2% of purchase loans, a total of 907,306. This total is a small increase in volume from 2015 levels, but represents a smaller proportion of the total purchase loans than in 2015.
- While the share of government-backed purchase loans to African-American borrowers increased slightly, from 9.8% to 10.6% from 2015 to 2016, and from 13.2% to 13.6% to Hispanic white borrowers, these shares remained quite small in comparison to the share to non-Hispanic white borrowers, which remained above 60%. Moreover, the share of these loans to low- and moderate-income borrowers decreased from 37.9% to 35.0%.
- Similarly, African-American and Hispanic white borrowers made small gains in the conventional purchase market, where their disparities with non-Hispanic white borrowers are greater. Non-Hispanic white borrowers receive over 70% of the conventional purchase loans, with African-American borrowers receiving just over 3% and Hispanic white borrowers 5.8%-- out of over 2.1 million conventional purchase mortgage loans, only 65,451 went to African-Americans nationally. As in the government-backed market, low- and moderate-income borrowers saw their share of conventional purchase loans decrease in 2016, from 21.6% to 20.6%.
- Rates of higher-priced lending incidence were up slightly overall for purchase loans, from 7.6% to 7.7%, and slightly down, from 2.5% to 2% of refinance loans. Racial and ethnic disparities continue to exist in the higher-priced market, however, as African-American and Hispanic white borrowers are between two and three times as likely as non-Hispanic white borrowers to receive a higher-priced purchase loan.
- Non-bank lenders made 52.9% of the total 2016 originations, including 56.1% of the refinance originations.
- Government-backed mortgages provide an important source of credit.
View CRL's analysis brief on the 2016 HMDA report.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Charlene Crowell at Charlene.crowell@responsiblelending.org.