Report: Low- and moderate-income families and many people of color continue to be excluded from the mortgage market

While 2020 was disastrous for millions of Americans impacted by the coronavirus, the mortgage industry was in overdrive as interest rates dropped to levels not seen since the housing crash of 2009

In a new report, the National Community Reinvestment Coalition (NCRC) found that the explosion of refinance lending reinforced historical patterns of disinvestment in lower-income and Black, Indigenous and People of Color (BIPOC) communities. Instead, the benefits of lower interest rates went mostly to non-Hispanic White, Asian Indian and Chinese homeowners. This was particularly pronounced in refinance lending, where the average interest rate fell from 4.89% in 2018 to 3.09% in 2020. Refinancing greatly increases the pace at which families build wealth through their homes.

In the report, NCRC analyzed Home Mortgage Disclosure Act (HMDA) data collected from lenders by the Consumer Financial Protection Bureau (CFPB). The data includes records for 88% of all mortgage applications taken by lenders and offers a detailed snapshot of the race, ethnicity, gender, age and location of those applications. In addition, the data includes loan cost and interest rate details and other loan features that are important for understanding structural barriers that lower-income and BIPOC borrowers encounter when they purchase or refinance homes.

“HMDA data is critical for the public to understand both the performance of lenders and who benefits from their lending, and the data from 2020 reveals a frustrating continuation of historic racial inequities in access to credit and homeownership,” said Dedrick Asante-Muhammad, NCRC’s chief of membership, policy and equity. “The collection and disclosure of the data provides transparency into the financial system, but it also reveals the continuing failure of our lenders, laws and regulators to close the racial homeownership and wealth divides.”

Since 2018, HMDA data has included detailed information on specific racial and ethnic groups and, with that, new insight into how different communities struggle to achieve the American Dream despite decades of advocacy, regulator support and lender efforts. 

“The gap in homeownership between Black and White households has remained almost unchanged for 120 years,” said Jason Richardson, NCRC’s senior director of research and evaluation and one of the authors of the report. “Today that gap remains near an all-time high. This drives a massive gap in wealth between homeowners and renters that grows larger with each passing year.”

NCRC has called for a 60% homeownership rate for communities traditionally excluded from homeownership. To achieve this goal, policymakers, community leaders and lenders themselves should rally around bold new approaches, race-specific metrics and performance requirements to bridge the wealth gap and help all American families have the chance to be homeowners and build wealth for themselves and their children.

View the full report: https://ncrc.org/ncrc-2020-home-mortgage-report-examining-shifts-during-covid/

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