This article of the Mortgage Market series examines how effectively eight major homebuilder mortgage companies serve their communities when financing new home loans. When you buy a newly built home, you often get your mortgage through the builder’s own lending company. These builder-lenders have become increasingly important as non-bank lenders firmly dominate home purchase lending across the country.
We analyzed over 206,000 loans made by homebuilder lenders between 2022 and 2024 by comparing their performance to more than 3 million loans made by other lenders operating in the same markets. This comparison approach ensures we’re measuring each homebuilder against similarly-sized competitors in identically situated cities, thus providing a fair assessment of their actual lending practices.
Our analysis focused on four key areas: how well each lender serves minority and low-income borrowers, whether they operate in diverse neighborhoods, how much they charge in fees and interest rates and how effectively they help families build wealth through homeownership.
Jason Richardson, Senior Director of Research
Resources
For the complete series, including videos, interactive visualizations and localized market analysis, visit our 2025 Mortgage Market series homepage. NCRC members can request customized community data requests as well. Those interested in membership benefits should contact Ralph Cyrus (Membership Engagement Specialist) at rcyrus@ncrc.org.
Key Takeaways
1
Top Quartile Leaders: Lennar Mortgage and DHI Mortgage both achieved A grades, representing the top quartile of homebuilder performance. Lennar excels in community access and neighborhood access to underrepresented demographic groups, while DHI demonstrated strong cost competitiveness and a solid community access performance.
2
Wealth-Building Excellence: Most homebuilders successfully helped borrowers achieve property value-to-income ratios between 3.4-3.7, meaning they bought homes worth about 3 ½ times their annual income – a higher value ratio than the average among other, non-builder mortgage providers. This indicates homebuilder lenders offer effective pathways to building wealth for their loan applicants.
3
Cost Competition Champions: Several homebuilder lenders provide superior rates and competitive closing costs compared to their peer lenders. DSLD ($2,740 in client savings) and DHI ($1,796 in client savings) led in cost advantages, while KBHS shows concerning cost patterns with significantly higher costs.
4
Strong Community Access: The top quartile performers (Lennar and DHI) demonstrate that homebuilder lenders can achieve strong community access across multiple dimensions. Second quartile performers (Pulte and DSLD) show competitive performances in specific areas despite some limitations.
Discussion
For each market and year combination, we identified peer lenders with loan counts between 50% and 200% of the homebuilder’s loan count in that specific market and for that specific year. This ensures fair comparisons by matching homebuilders against similarly-sized lenders operating in identical market conditions during the same time period.
Our analysis occurs within the context of a rapidly diversifying America. Research shows that people of color now drive virtually all new US population growth, with Hispanic Americans contributing to 91% of the nation’s 3.4 million person increase during the 2020-2023 period. This demographic shift makes fair access to homeownership financing increasingly critical for America’s economic future, as explored in Part 2 of our Mortgage Market Report series.
NCRC members can request detailed reports on a variety of research-based subjects by contacting NCRC’s Senior Director of Research Jason Richardson (jrichardson@ncrc.org).
Performance Indices
At the core of this analysis is a grading framework based on the four indices described below, with lenders assigned letter grades from A to F. This establishes a clear benchmark to compare lending between the homebuilder lenders.
These four metrics combine data from the Home Mortgage Disclosure Act (HMDA) database to assess the impact of lenders in four main categories:
- Underrepresented Communities Index: Measures service to Asian, Black, Hispanic and low- to moderate-income (LMI) borrowers.
- Neighborhood Access Index: Shows service rates to low-income and majority-minority census tracts.
- Closing Cost Index: Shows combined closing charges and rate spread performance relative to peers.
- Wealth-Building Power Index: Measures property value-to-income ratios, indicating effectiveness at helping families build home equity.
This allows us to mitigate the impact of different physical footprints and population sizes and present a clear picture of how these lenders perform in their own unique context compared to others in similar contexts.
Methodology
Our analysis uses HMDA data for the 2022-2024 period focused on each homebuilder’s top 10 markets where at least 1,000 loans originated. We compared four composite indices (Underrepresented Communities, Neighborhood Access, Closing Cost and Wealth-Building Power) weighted by loan volume. Please visit the end of this report for the detailed methodology.
The Grades
In this report, we have employed a grading system to assess the impact of each builder-lender in their context more clearly. No lender failed this test, but in some cases this grading system did reveal areas for improvement. Wealth-building via new home construction is still possible at scale even for working class families:
- A: Top quartile performance (Ranks 1-2)cConsistently outperforms peer lenders across multiple measures
- B: Second quartile performance (Ranks 3-4): Generally competitive with notable strengths
- C: Third quartile performance (Ranks 5-6): Mixed performance with concerning gaps
- D: Bottom quartile performance (Ranks 7-8): Consistently underperforms on critical measures
Individual Homebuilder Performance
We examined each lender individually and ranked each by their loan volume during the study period. Each lender’s performance is compared to peer lenders operating in the same communities. Peer lenders are defined as those reporting loan volumes between 50% and 200% of the target builder-lender’s home purchase loans in shared markets.
While builders operate under different business models than traditional lenders, this variation affects all builders consistently. The comparison measures relative performance by evaluating how much each builder leads, or lags behind, their peers compared to other builders in the study. This approach assesses the degree of difference rather than the absolute performance level they have against their peers, providing a standardized way to evaluate builder performance across different market conditions.
DHI Mortgage Company (D.R. Horton) - 75,268 Loans
Markets: Atlanta, Austin, TX, Dallas-Fort Worth, Houston, Jacksonville, FL, Myrtle Beach, FL, Orlando, FL, Phoenix, San Antonio, Tampa, FL
Overall Grade: A
DHI ranks in the top quartile with strong cost competitiveness and solid community access performance, though it shows a gap in neighborhood access when it comes to low-income areas. Their homes are less expensive than the homes that their peers are financing and they are charging less in both closing fees and interest rates than those peers as well:
Note: This analysis focuses on Asian, Black and Hispanic borrowers. We do not highlight Native American and Pacific Islander/Native Hawaiian borrowers due to their small homebuilder lending numbers. However, a detailed analysis of lending patterns to these communities is available in Part 3 of our Mortgage Market series.
DHI’s financial profile shows a focus on affordable housing by serving borrowers with lower incomes while providing superior rates and significant cost savings:
Key Strengths
DHI provides exceptional cost advantages and serves diverse borrower communities effectively. The company charges nearly $1,800 less in total costs than comparable lenders while providing excellent interest rates. DHI consistently serves borrowers with lower incomes compared to other lenders in the same areas and demonstrates solid performance levels across most demographic groups.
Areas for Improvement
DHI shows concerning underperformance when it comes to neighborhood access, particularly in low-income census tracts. The company operates less frequently in working class neighborhoods compared to its peer lenders, which limits its broader community impact despite having strong borrower-level demographics.
Notable Metro Performance
DHI performs particularly well in markets with significant minority populations. In Atlanta, the company serves Black borrowers at levels that align with the area’s diverse demographic composition. Their Texas markets show a strong Hispanic lending performance, which corresponds with the rapid Hispanic population growth driving demographic change across the Sun Belt region. This dynamic is documented in more detail in Part 4 of our Mortgage Market series, which focuses on mortgage lending across American cities.
Lennar Mortgage - 57,602 Loans
Markets: Austin, TX, Dallas-Fort Worth, Denver, Houston, Las Vegas, Miami, Orlando, FL, Phoenix, Riverside, CA, San Antonio, Tampa, FL
Overall Grade: A
Lennar achieved a top quartile performance due to its exceptional service to underrepresented communities and maintaining strong neighborhood access while providing competitive wealth-building opportunities for borrowers:
Lennar charges higher costs than its peers, but has an exceptional rate of performance when it comes to serving lower-income borrowers. The closing costs Lennar reports are substantial, but their rates are exceptionally good. They are also enabling lower-income consumers to purchase homes worth almost as much as their peers:
Key Strengths
Lennar excels at serving Hispanic communities while providing exceptional interest rates. The company serves Hispanic borrowers at much higher rates than other lenders in the same markets and operates extensively in diverse neighborhoods. Despite charging higher upfront costs than some of the other builders, Lennar provides some of the best interest rates available that will benefit borrowers over the life of their loans. The company demonstrates the strongest overall performance in the Underrepresented Communities Index and ranks highly in the Neighborhood Access Index.
Areas for Improvement
While Lennar provides excellent rates, borrowers face higher upfront costs that may create barriers for some homebuyers. This is not always a bad thing. Higher closing fees are driven in part by discount points, which drive the interest rate down in exchange for a higher cost upfront. In the long term, this can mean substantial savings for the borrower.
Notable Metro Performance
Lennar performs strongest in Texas markets (San Antonio and Houston in particular) where the company serves Hispanic communities at levels that reflect the rapid Hispanic population growth transforming these metropolitan areas. This was explored at length in Part 4 of our series. However, Miami represents a missed opportunity as the company underperforms in serving the area’s large Hispanic population despite operating in this highly diverse market. Undoubtedly, the high cost nature of this market plays a role as well.
Pulte Mortgage - 23,452 Loans
Markets: Atlanta, Austin, TX, Charlotte, NC, Dallas-Fort Worth, Houston, Las Vegas, North Port-Sarasota, FL, Orlando, FL, Phoenix, San Antonio
Overall Grade: B
Pulte ranks in the second quartile with competitive cost savings and strong Asian representation, demonstrating solid performance despite some gaps in serving underrepresented communities and expanding neighborhood access rates. In particular, LMI borrowers and census tracts are poorly served by Pulte:
Key Strengths
Pulte shows strong performance in the Asian borrower segment and provides competitive pricing for borrowers who qualify for its services.
Areas for Improvement
Pulte operates primarily in affluent market segments and shows gaps in serving Hispanic, low-income and diverse neighborhood communities, creating barriers for broad community access.
KBHS Home Loans (KB Home) - 18,457 Loans
Markets: Austin, TX, Dallas-Fort Worth, Denver, Inland Empire, CA, Las Vegas, Orlando, FL, Phoenix, Riverside, CA, Sacramento, CA, San Antonio
Overall Grade: C
KBHS ranks in the third quartile with an exceptional neighborhood access performance, particularly in majority-minority communities. However, their loans come with substantially higher closing costs, which could create significant financial barriers for borrowers:
Key Strengths
KBHS had the strongest neighborhood access performance among all homebuilder lenders, with nearly 70% of its loans being made in majority-minority communities. The company serves diverse communities well (particularly Asian and Black borrowers) by providing competitive interest rates.
Significant Concerns
KBHS charges the highest closing costs among all homebuilders at $19,585 compared to $11,385 for its peers, creating substantial financial barriers for new homebuyers. The company underserves low-income borrowers despite having strong demographic representation in other areas. KBHS reports having higher interest rates than some builders while still offering far better rates than its peer lenders.
Notable Metro Performance
KBHS performed well in markets with significant Asian populations, particularly in California. However, the company’s extremely high cost structure severely limits access despite strong community representation patterns.
Taylor Morrison Home Funding - 15,223 Loans
Markets: Austin, TX, Charlotte, NC, Dallas-Fort Worth, Denver, Orlando, FL, Phoenix, Raleigh, NC, Sacramento, CA, San Antonio, Tampa, FL
Overall Grade: C
Taylor Morrison ranks in the third quartile with excellent Asian community representation, but shows gaps in serving other underrepresented communities while charging higher closing costs:
Key Strengths
Taylor Morrison leads all homebuilders in serving Asian communities and provides competitive interest rates in its markets.
Areas for Improvement
The company shows concerning gaps in serving Hispanic, LMI borrowers and low-income communities while operating primarily in affluent market segments. In most metrics, Taylor Morrison underperforms its peers.
K. Hovnanian American Mortgage - 6,098 Loans
Markets: Dallas-Fort Worth, Houston, Phoenix, Washington, DC
Overall Grade: D
K. Hovnanian ranks in the bottom quartile with competitive interest rates, but shows a trend of concerning performance and high premium costs when it comes to underrepresented communities:
Key Strengths
K. Hovnanian shows strong Asian community representation and provides competitive interest rates.
Significant Concerns
The company shows the largest gaps in serving underrepresented communities while charging substantial premium costs, raising serious fair lending concerns.
Mattamy Home Funding - 5,713 Loans
Markets: Austin, TX, Charlotte, NC, Dallas-Fort Worth, Jacksonville, FL, Orlando, FL, Phoenix, Raleigh, NC, Sarasota, FL, Tampa, FL
Overall Grade: D
Mattamy ranks in the bottom quartile for several reasons. While their interest rates are better than their peer lenders, it is not as competitive as several other builders in this group. With substantially higher closing costs and borrower income nearly identical to peers, it is not a surprise that they underperformed when it comes to lending to LMI borrowers by 9 percentage points:
Key Strengths
Mattamy shows balanced demographic representation and provides competitive interest rates.
Significant Concerns
The company shows concerning gaps in neighborhood access performance among all homebuilders by operating primarily in affluent areas while charging substantially higher closing costs.
DSLD Mortgage - 5,151 Loans
Markets: Baton Rouge, LA, Jackson, MS, Lafayette, LA, Mobile, AL, New Orleans
Overall Grade: B
DSLD ranks in the second quartile with exceptional cost savings and strong Black community representation in its Southern Gulf regional markets, while showing limitations in neighborhood access across some underrepresented community measures:
Key Strengths
DSLD provides the largest cost savings among all homebuilders ($2,740 per loan) while serving Black communities effectively in Southern Gulf markets. The company offers strong cost competitiveness and targeted community access within its regional specialization.
Areas for Improvement
Despite strong Black community representation, DSLD operates primarily in less diverse neighborhoods overall and serves fewer low-income borrowers than its peer lenders by some measures.
Notable Metro Performance
Baton Rouge demonstrates strong Black community representation with substantial cost savings, while New Orleans shows a solid performance in Louisiana’s most diverse market.
Key Findings and Market Patterns
The analysis reveals a stark divide in how homebuilder lenders approach community wealth-building, with performance varying dramatically based on builder-lender’s corporate strategy and geographic focus. This variation underscores why our peer comparison methodology, which evaluates each lender against similar-sized competitors in identical markets, provides such crucial insights into actual lending practices.
Lennar Mortgage and DHI Mortgage stand out as industry leaders, with both earning A grades through simultaneously serving underrepresented communities and effectively maintaining competitive business practices. Their success takes different forms, with Lennar excelling in comprehensive community access across diverse demographic groups. DHI achieved exceptional cost competitiveness by providing nearly $1,800 in savings per loan compared to its peer lenders. These top performers prove that integrated builder-lender models can create pathways to homeownership for low- and moderate-income families and communities of color.
The middle tier of lenders analyzed tells a story of focused specialization rather than comprehensive community service. Pulte Mortgage and DSLD Mortgage both earned B grades through distinct regional and demographic strategies. Pulte offers very competitive pricing, averaging loan rates 57 basis points below the market average (the lowest interest rates offered by all other builders in this report). DSLD delivers exceptional cost savings of $2,740 per loan while serving Black communities effectively in their Southern Gulf markets. These approaches demonstrate viable pathways towards solid community performance, although they fall short of the comprehensive access achieved by top performers.
Perhaps most concerning is that the bottom tier lenders reveal how geographic market selection can mask, or enable, exclusionary lending practices. KBHS charges closing costs topping $19,585 compared to just $11,385 by its peer lenders, creating substantial barriers despite its strong neighborhood access performance. Meanwhile, both K. Hovnanian and Mattamy operate primarily in affluent market segments and show the largest gaps in serving underrepresented communities while charging premium costs.
This performance spectrum demonstrates that homebuilder lenders face a fundamental choice: using their integrated model to expand homeownership opportunities for underserved communities, or concentrating themselves in premium markets that limit access to wealth-building opportunities for all aspiring homeowners. The wide variation in outcomes, even when controlling for market conditions through peer comparisons, suggests these differences reflect deliberate business strategies rather than external constraints.
The policy implications are clear. As discussed in Part 1 of our series, non-bank lenders now dominate mortgage markets without the same regulatory oversight that traditional banks face. The concerning patterns of premium market concentration among some homebuilders warrant enhanced regulatory attention to ensure compliance with fair lending requirements and Community Reinvestment Act principles.
Appendix A: Homebuilder Mortgage Company Grading Methodology
Overview
The methodology used to evaluate homebuilder mortgage companies centered on a four-index system based on Home Mortgage Disclosure Act (HMDA) data from the 2018-2024 period. All calculations use loan-volume weighted national averages and z-score standardizations to ensure fair weighting across indices and allow for independent verification.
Methodology
Data Sources
Our analysis uses mortgage lending data captured by the Consumer Financial Protection Bureau (CFPB) as part of the HMDA dataset. The HMDA data used covers approximately 88% of the US mortgage market and includes detailed information about loan applications, approvals and terms.
Primary Data Sources:
- Home Mortgage Disclosure Act (HMDA) data from all reporting financial institutions
- FFIEC Census demographic and income data (modified Census Bureau data prepared specifically for banking analysis)
- Federal regulatory data on lender classifications
What Loans We Analyzed
Unless otherwise noted, our analysis focuses on loans for owner-occupied, single-family homes (1-4 units). This includes:
- Homes people buy to live in themselves
- Traditional single-family houses, townhomes and small, multi-unit properties
- Site-built homes (not manufactured homes)
- Conforming loans only (loans eligible for purchase by Government Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac, excluding jumbo loans)
- Enterprises (GSEs) like Fannie Mae and Freddie Mac, excluding jumbo loans)
Jumbo loans serve higher-income borrowers in premium market segments and would introduce unnecessary confusion into the wealth-building and community access metrics by skewing average borrower incomes and property values upward.
We excluded investment properties, large apartment buildings, vacant land purchases and jumbo loans in order to focus on traditional homeownership patterns and mainstream mortgage products that serve typical homebuyers.
Missing Race and Ethnicity Data
We exclude loans without demographic information from our racial and ethnic analysis.
Standard Methods and Definitions
Cost Per Dollar
This metric shows the total amount borrowers pay over the life of a 30-year loan for each dollar they borrowed, including both monthly payments and upfront costs. For example, a Cost Per Dollar of $2.30 means a borrower pays $2.30 over 30 years for every $1.00 they borrowed initially.
Interest Rate Analysis
We analyzed both the actual interest rates borrowers received and the “rate spread,” or how much higher, or lower their rate was compared to typical market rates on the day they got their loan. This helps us compare loans made at different times when overall interest rates were changing.
How We Measure Disparities
Gap Calculations
When we analyze lending gaps between groups, we show the difference in percentage points. For example, if 70% of White applicants are approved for home loans, but only 60% of Black applicants are approved, we report this as a 10 percentage point gap.
Market Share Analysis
We calculate each group’s share of total lending by dividing the number of loans made to that group by the total number of loans overall. We excluded loans where demographic information is missing.
Year-over-Year Changes
We calculate percentage changes from one year to the next to identify trends and measure whether disparities are growing or shrinking over time.
Geographic Analysis
Our analysis uses US Census Bureau Core-Based Statistical Area (CBSA) definitions current at the time of the analysis. CBSAs include both Metropolitan Statistical Areas and Micropolitan Statistical Areas. When comparing data across years, we note when census tract boundaries changed (usually every ten years) as this can affect geographic comparisons.
Data Limitations
Coverage
- HMDA covers about 88% of the US mortgage market, but excludes some smaller lenders.
- Some borrowers chose not to provide demographic information.
- Purchased loan data often lacks demographic details due to regulatory gaps.
Analysis Considerations
- Our analysis shows patterns in lending, but cannot definitively prove discrimination without additional investigation.
- Multiple factors affect lending decisions, with disparities resulting from various causes.
- Economic conditions, local housing markets and policy changes all influence lending patterns.
Transparency and Verification
Our analysis is designed to be reproducible. We document our data sources, calculation methods and analytical decisions so that others can verify our findings. Our methodology is available for public review and we welcome questions about our approach. The HMDA data utilized in our analysis work is publicly available at this link, allowing independent researchers to conduct their own analyses.
Homebuilder Analysis Methods
Data Sources and Coverage
Primary Data: Home Mortgage Disclosure Act (HMDA) data from homebuilders’ datasets covering the 2018-2024 period.
Sample: 8 homebuilder mortgage companies and their top 10 Core-Based Statistical Areas (CBSAs) with at least 1,000 loans. The 1,000-loan threshold ensures statistical reliability and adequate peer lender identification.
Loan Scope: Analysis includes only conforming loans eligible for purchase by Government Sponsored Enterprises (Fannie Mae and Freddie Mac), excluding jumbo loans.
Total Volume: Over 206,000 homebuilder loans compared against more than 3 million peer lender loans.
Peer Comparison Framework
For each CBSA and year analyzed, identified peer lenders with loan counts between 50% and 200% of each homebuilder’s loan count were analyzed and compared with the lenders in this study. This ensures fair comparisons by matching homebuilders against similarly-sized lenders in the same markets. Only peer loans from years when lenders qualified as peers were included.
Metrics Analyzed
Four Equally Weighted Composite Indices
The four indices receive equal weighting (25% each) because they measure distinct dimensions of community impact: borrower access, neighborhood presence, affordability and wealth-building. Each dimension is equally critical to comprehensive fair lending assessment. While alternative weighting schemes may be appropriate in specific regulatory or market contexts, equal weighting provides a balanced foundation for this initial application of the framework:
- Underrepresented Communities Index: Combining Asian, Black, Hispanic and Low- and Moderate-Income Borrower shares
- Neighborhood Access Index: Combining Low- and Moderate-Income Census Tract and Majority-Minority Census Tract shares
- Closing Cost Index: Combining total closing charges and rate spread performance
- Wealth-Building Power Index: Property value-to-income ratio
Neighborhood Access Index
We combined Low- and Moderate-Income Census Tract (LMICT) and Majority-Minority Census Tract (MMCT) shares into a single Neighborhood Access Index. This measures how effectively lenders serve diverse neighborhoods across different community types.
Better Performance Indicates:
- Higher representation in both low-income and minority communities
- Balanced service across diverse neighborhood types
- Broader geographic reach rather than concentration in affluent areas
This approach recognizes that the most effective community lenders serve both economically disadvantaged areas and diverse communities rather than concentrating in only one type of neighborhood.
Underrepresented Communities Index
Rather than treating demographic groups separately, we combined Asian, Black, Hispanic and Low- and Moderate-Income Borrower shares into a single Underrepresented Communities index. This prevents lenders from receiving full credit for serving wealthy minority borrowers while neglecting low-income communities.
The index takes the minimum value between the average minority representation and LMIB representation. This ensures that effective community access requires serving both minority communities and low-income borrowers.
Closing Cost Index
We combined the total closing charges and rate spread performance into a single Closing Cost Index. This accounts for the relationship between upfront costs and interest rates as borrowers may pay higher closing costs to secure lower rates, or vice versa.
Better Performance Indicates:
- Lower total closing charges compared to peer lenders
- Better rate spread performance (lower rates relative to market rates)
- Overall cost advantage for borrowers across both upfront and ongoing costs
This approach recognizes that borrowers evaluate the total cost of home financing, including both the immediate expenses and the long-term interest costs when comparing lending options.
Wealth-Building Power Index
We combined borrower income, property value and loan amount into a Wealth-Building Power Index calculated as an overall property value-to-income ratio. This measures how effectively lenders help lower-income families access higher-value homes with the appropriate financing options.
Better Performance Indicates:
- Lower-income borrowers accessing higher-value properties
- Appropriate loan amounts that enable homeownership without overextending borrowers
- Creating pathways for families to build equity and wealth through homeownership
This approach recognizes that the best community development lenders help modest-income families purchase homes that will appreciate and add to families’ generational wealth. It will combat the trend of simply serving high-income borrowers or concentrating in expensive markets.
Demographic Data Standards
The race/ethnicity categorizations used are based on HMDA reporting requirements. Borrowers may select multiple racial categories. The Asian racial/ethnic category includes Native Hawaiian and other Pacific Islander communities. The Hispanic racial/ethnic category includes borrowers of any race identifying as Hispanic/Latino. Percentages exclude loans with missing demographic information.
Grading Schema
Each composite index weighted equally with better performance were defined as either:
- Higher: Underrepresented Communities Index, Neighborhood Access Index or Wealth-Building Power Index or;
- Lower: Closing Cost Index (indicating cost advantages for borrowers)
The Wealth-Building Power Index rewards lenders who help lower-income borrowers access higher-value properties with appropriate loan amounts, which creates pathways to homeownership and increases equity building.
Grade Scale:
- A: Top quartile performance – Consistently outperforms peer lenders across multiple measures
- B: Second quartile performance – Generally competitive with notable strengths
- C: Third quartile performance – Mixed performance with concerning gaps
- D: Bottom quartile performance – Consistently underperforms on critical measures
This methodology ensures fair, standardized comparisons while maintaining accessibility for general audiences analyzing homebuilder lending patterns.
Four-Index Methodology
The grading system uses four equally weighted composite indices, each converted to z-scores, to ensure fair weighting regardless of the natural variance ranges.
Index 1: Underrepresented Communities Index
Purpose: Measures effectiveness in serving minority and low-income borrowers
Step 1: Calculate Relative Performance Ratios
- Asian Ratio = (Asian %) ÷ (Asian Peers %)
- Black Ratio = (Black %) ÷ (Black Peers %)
- Hispanic Ratio = (Hispanic %) ÷ (Hispanic Peers %)
- Average Relative Performance Ratio = (Asian Ratio + Black Ratio + Hispanic Ratio) ÷ 3
Step 2: Calculate LMIB Relative Performance Ratio
- LMIB Ratio = (LMIB %) ÷ (LMIB Peers %)
Step 3: Take Minimum and Convert to Index Score
- Underrepresented Communities Index = (MIN(Average Relative Performance Ratio, LMIB Ratio) – 1.0) × 100
This approach prevents lenders from receiving full credit for serving wealthy minority borrowers while neglecting low-income communities. The minimum function ensures effective community access requires serving both minority communities and low-income borrowers.
Index 2: Neighborhood Access Index
Purpose: Measures service to diverse neighborhood types.
Step 1: Calculate Gaps
- LMICT Gap = LMICT % – LMICT Peers %
- MMCT Gap = MMCT % – MMCT Peers %
Step 2: Average the Gaps
- Neighborhood Access Index = (LMICT Gap + MMCT Gap) ÷ 2
The Low- and Moderate-Income Census Tracts (LMICT) and Majority-Minority Census Tracts (MMCT) are combined to better measure the balance of service provided across diverse neighborhood types rather than their concentration in affluent areas.
Index 3: Closing Cost Index
Purpose: Measures borrower cost advantages.
Step 1: Calculate Charge Advantage (in thousands)
- Charge Advantage = (Peer Charges – Homebuilder Charges) ÷ 1,000
Step 2: Calculate Rate Advantage
- Rate Advantage = Peer Rate Spread – Homebuilder Rate Spread
Step 3: Weight and Average
- Closing Cost Index = (Charge Advantage + Rate Advantage × 3) ÷ 2
This accounts for the relationship between upfront costs and interest rates. The rate spread is weighted by a factor of 3 in order to balance the closing charge differences scaled to the thousands. It also recognizes borrowers’ evaluated total financing costs.
Index 4: Wealth-Building Power Index
Purpose: Measures effectiveness in helping lower-income families access higher-value homes.
Step 1: Calculate Ratios
- Homebuilder Ratio = Property Value ÷ Income
- Peer Ratio = Peer Property Value ÷ Peer Income
Step 2: Calculate Difference
- Wealth-Building Power Index = Homebuilder Ratio – Peer Ratio
This approach helps measure how effectively lenders help modest-income families purchase homes that will appreciate and help build generational wealth rather than simply serving high-income borrowers or concentrating in expensive markets.
Z-Score Standardization Methodology
To ensure fair weighting across all indices despite different natural variance ranges, each index is converted to z-scores before calculating each lenders’ final grades. Z-score standardization ensures fair weighting across all indices by accounting for their different natural variance ranges. Without standardization, indices with larger variances would dominate the final grade determinations regardless of their assigned weights.
For example, the Underrepresented Communities Index has a standard deviation of 26.96, while the Wealth-Building Power Index has a standard deviation of just 0.21. Converting each index to z-scores before averaging them ensures that each of the four dimensions contributes equally to the final grade, as intended by the equal weighting framework. We identified peer lenders with loan counts between 50% and 200% of the homebuilder’s loan count in that specific market and year. This ensures fair comparisons by matching homebuilders against similarly-sized lenders operating in identical market conditions during the same time period.
Population Statistics Across All Lenders:
Means:
- Underrepresented Communities Index: -27.16
- Neighborhood Access Index: -3.95
- Closing Cost Index: -0.20
- Wealth-Building Power Index: 0.33
Standard Deviations:
- Underrepresented Communities Index: 26.96
- Neighborhood Access Index: 6.56
- Closing Cost Index: 2.08
- Wealth-Building Power Index: 0.21
Z-Score Formula: Z-Score = (Individual Score – Mean) ÷ Standard Deviation
Resources
For the complete series, including videos, interactive visualizations and localized market analysis, visit our 2025 Mortgage Market series homepage. NCRC members can request customized community data requests as well. Those interested in membership benefits should contact Ralph Cyrus (Membership Engagement Specialist) at rcyrus@ncrc.org.
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