In the years preceding the COVID-19 pandemic outbreak and economic recession in the U. S., the Hispanic homeownership rate was on the rise. In the second quarter of 2020, the Hispanic homeownership rate was 51.4%, the highest point since the Census Bureau began tracking it in 1994. Meanwhile, home equity levels also increased for Latino homeowners. In 2016, for the first time since the Great Recession of 2008, Latino homeowners saw gains in wealth. And then they did again in 2019. But because of persisting wealth disparities and systemic inequities, Latinos have disproportionately lost jobs and income during the pandemic. Much of the Latino community is at great risk of losing their homes and wealth gains in the fallout from the current crisis.
In 2019, Home Mortgage Disclosure Act (HMDA) data included expanded racial data, including sub-groups of the census categories of Hispanic. Lenders were asked to collect data on which racial sub-group borrowers identified with on their mortgage applications. This was a result of the 2015 HMDA Rule by the Consumer Financial Protection Bureau (CFPB). Hispanic, Asian and Hawaiian or Pacific Islander (HoPI) borrowers now have the option to identify themselves as a part of several different sub-categories. Applicants and co-applicants can select up to five different ethnicities and five different races that they identify with as well. For Hispanic applicants, this means that they can choose from Mexican, Cuban or Puerto Rican. If the borrower indicates that they identify with another Hispanic group (for example, Nicaraguan), then the lender is permitted to refer to the applicant as belonging to a fourth group, “Other Hispanic.”
In this analysis, we examined the HMDA records for Hispanic loan applicants, with particular attention to the variations in loan originations, loan type and costs between Hispanic applicants and overall applicants, as well as between Hispanic subgroups. We also examined HMDA records for Afro-Latinos, applicants that identified any combination of Hispanic and African American on their application.
This descriptive analysis was intended to better understand the structural or other factors that drive variation in home lending patterns for Latinos, especially in geographic regions with significant and growing Latino populations.
Previous research has underscored the importance of Latino homeownership for a healthy national housing market. For example, in the decade preceding the COVID-19 pandemic outbreak in the U.S., Hispanics accounted for more than 40% of household growth, and growth in Latino homeownership accounted for nearly 60% of overall homeownership growth. Furthermore, between 2015-2019, Hispanics were the only racial/ethnic group to increase their homeownership rate for five consecutive years.
Meanwhile, analyses of home lending trends to Latinos since the Great Recession, indicated that Latinos’ recovery in the mortgage market was mixed and uneven. For example, the mortgage denial rate for Latinos has decreased. Yet, Latino borrowers faced disparities in mortgage access, in particular when seeking conventional mortgages. Latino borrowers were also more likely than White borrowers to be denied a mortgage because of issues with debt-to-income ratio (DTI) and credit.
Research from the last decade has started to explore the differences in homeownership rates for Hispanic subgroups. For example, between 2000-2010, the homeownership rate for Cubans declined by less than one percentage point, while the rate for Salvadorans experienced an increase of 10%. Very little research exists about the experiences of Afro-Latinos in the mortgage market. A vital part of the Latino community, Afro-Latinos, identifying as individuals of African descent from Latin America or individuals who have one parent of African descent and another of Latino descent, comprise 24% of U.S. Latinos.