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New HMDA Data Shows Mortgage Market Continues to Exclude Consumers of Color and Low-Wealth Families

Thursday, September 29, 2016

Today, the Center for Responsible Lending (CRL) released a policy analysis based on new mortgage data collected under the Home Mortgage Disclosure Act (HMDA). The data, which covers nearly all mortgages made in the United States in 2015, revealed that access to mortgage credit remains out of reach for many consumers of color.

Despite fair lending laws and mortgage rules, Hispanic and African-American consumers received a small percentage of the mortgages made in 2015 and remain disproportionately reliant upon government-backed mortgages that come with high rates and fees. Very few conventional loans were made to these consumers.

"Although it's promising to see the housing market expand over the last year, consumers of color still do not have broad access to the most affordable mortgage loans," said Nikitra Bailey, an executive vice president with CRL. "As our nation becomes increasingly more diverse, these disparities will suppress economic growth across communities that have been left out of the economic recovery. CRL believes that every creditworthy consumer, regardless of race or ethnicity, should be able to access mortgages and the potential for family wealth that comes from homeownership."

The data shows that borrowers of color, particularly African-Americans and Hispanic, and families with low-to-moderate incomes remain underserved in the mortgage market, especially with loans sold to Fannie Mae and Freddie Mac. The report also shows that borrowers of color and low-to-moderate-income consumers that do access mortgage loans to buy a home overwhelmingly rely upon government-backed loans.

Highlights from the 2015 HMDA data include:

  • The share of loans made to African-American and Hispanic borrowers in 2015 rose modestly, but remained well below the population share they compose. In 2015, African-Americans received 5.5 percent of loans up from 5.2 percent in 2014; Hispanic borrowers received 8.3 percent up from 7.9 percent in 2014. These percentages fall far short of the share of the U.S populations that these groups represent. African-Americans compose 13.3% and Hispanics 17.6% of the total national population.
  • The share of loans made to low and moderate-income borrowers rose slightly in 2015 to 28 percent from 27.1 percent. Although modestly higher than the share in 2014 the 2015 share was lower than it was from 2009 to 2013.
  • Most home purchase loans made to African-American and Hispanic borrowers continued to be through government insured programs (including FHA, VA and others) and reliance on these programs continued to increase. In 2015, 70.2 percent of loans to African-American borrowers and 62.6 percent of loans to Hispanic borrowers were government backed. These shares compare to just 36.0 percent of loans made to non-Hispanic white borrowers.
  • In keeping with recent trends, a very small share of conventional home-purchase loans were made to African-American and Hispanic borrowers. In 2015, just 2.7 percent of conventional home-purchase loans were made to African-American borrowers and just 5.1 percent of these loans were made to Hispanic borrowers. These percentages are virtually unchanged from the levels in 2014.
  • The share of African-American and Hispanic borrowers that received "higher-cost" loans fell dramatically from 25.6 and 28.4 percent respectively in 2014 to 16.2 and 18.5 percent respectively in 2015. This is a result of changes in the cost structure of government-insured loans (including FHA). The shares, however, remained well above the share of non-Hispanic white borrowers that received higher-costs loans, just 6.2 percent in 2015
  • The share of both home-purchase and refinance loans made by non-depository lenders continued to increase. In 2015, 50 percent of all first-lien owner-occupied home-purchase loans were made by non-depository mortgage lenders. This share has been increasing in recent years and is the highest level since 1995.

The new HMDA data confirms a recent CRL study, The Drought Continues: Mortgage Credit Runs Dry for Californians of Color, revealing that the housing market in California and across the country are recovering unevenly, especially in communities of color. These trends are particularly troubling in light of the declining homeownership rate for African-Americans and Hispanics. Recent regulations have made the loans in today's market much safer for lenders and borrowers. Market overcorrections have denied African-American, Hispanic, and low-income consumers access to these safe mortgage loans. The evidence from the 2015 HMDA data show that the market is simply not serving these borrowers.

View CRL's analysis brief on the 2015 HMDA report.

Since the HMDA was enacted, it has provided critical information to both the public and financial sectors – information that has been used to identify housing trends, root out discrimination, and reach underserved areas.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto, or Charlene Crowell