WASHINGTON, D.C. – September 23, 2015 – (RealEstateRama) — Today, in reaction to the release of 2014 Home Mortgage Disclosure Act (HMDA) data, NCRC President and CEO John Taylor made the following statement:
“The Home Mortgage Disclosure Act data release for 2014 illustrates a disturbing and highly problematic trend with hard numbers: opportunities for homeownership are still very limited. Particularly in low- and moderate-income communities and communities of color, it’s too difficult to become a homeowner.”
“We are in danger of becoming a society in which homeownership and its benefits are reserved primarily for the wealthy, with everyone else relegated to high-cost rental housing. Homeownership is the single best mechanism for working families to build wealth and enter the middle class. Without access to homeownership opportunities, the avenues to climb the economic ladder are few.”
“Regulators need to get the picture. When federal bank regulators evaluated the Community Reinvestment Act (CRA) performance of financial institutions in 2014, they gave passing grades to over 98 percent of institutions evaluated. Clearly this does not match the reality on the ground, where loans are too difficult to come by and creditworthy borrowers are going unserved. Federal regulators need to do more to enforce CRA and fair lending laws, and ensure that creditworthy borrowers are able to access to home loans.”
The 2014 data shows a slight uptick in home purchase lending for African Americans and Hispanics but not an increase commensurate with their growing share of the population. There was also a modest decrease in home purchase lending to low- and moderate-income borrowers. The cost of loans increased, especially for borrowers of FHA loans. And as shown below, overall, stubborn and persistent disparities by race and income manifest themselves, continuing a trend over several years. With underwriting standards requiring FICO scores in the 700s, this is not surprising. NCRC stands ready to work with lenders and regulators to introduce safe and sound and flexible underwriting in order to increase access to homeownership for traditionally underserved populations.
The 2014 HMDA data for owner-occupied single family housing, not including manufactured housing, show the following:
The number of home purchase and refinance loans originated to owner-occupants was 4.7 million, for a total amount of $1,092,903,327.
FHA lending fell to 16 percent of home purchases and refinance loans on owner-occupied single family homes. African American and Hispanic borrowers received FHA loans for 32.8 percent and 32.2 percent of their loans, respectively, while whites used FHA for 13.4 percent of their loans. Asian Americans received FHA loans the least, at just 8.8 percent of their loans.
Low- and moderate-income borrowers represented 29.6 percent of all home purchase and refinance borrowers as compared to 28.4 percent in 2013.
Home purchase and refinance applications resulted in loans 62.2 percent of the time, but income played a large role in determining which loans closed and which didn’t. Middle- and upper-income borrowers closed on their new homes or refinance applications 65 percent of the time while low- and moderate-income borrowers did so just 56.5 percent of the time.
Even adjusting for income, large racial disparities exist in our mortgage lending system. Middle- and upper-income African American and Hispanic borrowers lagged behind their white counterparts. While middle- and upper-income Hispanic borrowers closed on their loans 59.6 percent of the time and middle- and upper-income African American borrowers did so at 52.7 percent of the time, white middle- and upper-income borrowers closed on their loans 68.3 percent of the time.
Denial disparities persist regardless of income, with middle- and upper-income home purchase denial rates for African American borrowers at 16.3 percent, Hispanic borrowers at 13.7 percent, and whites at just 8.4 percent. These figures jump dramatically in low- and moderate-income neighborhoods, with a denial rate of 14.9 percent for whites, 19.7 percent for Hispanics, and 25.2 percent for African Americans.
The share of loans to African Americans grew to 5.31 percent from 4.83 percent in 2013, and Hispanic families received 9.4 percent of loans as opposed to the 8.64 percent they received 2013. In terms of raw numbers there were seeing far more sales to owner-occupants in 2014, with almost 2.8 million owner-occupants buying a home this years, up from 2.6 million in 2013 and 2.3 million in 2012.
Neighborhoods continue to be an important factor in deciding where lending occurs. For middle- and upper-income applicants trying to buy a home in a middle- and upper-income tract, the denial rate was just 8.8 percent, but for middle- and upper-income applicants trying to buy a home in low- and moderate-income tracts the denial rate was 17.2 percent.
NCRC and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business development.