The Failure of the Private Mortgage Market

A review of mortgage data from 2020 reveals how the private lending market continues to inadequately serve most households of color. This is despite government-backed mortgages designed to assist low- and moderate-income (LMI) households. To solve this ongoing and enduring failure, the National Community Reinvestment Coalition (NCRC) recommended a set of actions by federal bank regulators, including explicit goals to directly address the racial homeownership divide, better data collection and tougher evaluations and enforcement of bank performance.

A new report from NCRC, based on analysis of 2020 Home Mortgage Disclosure Act data, found that whites and Asian Americans are the major racial/ethnic categories whose demographic representation is about equally reflected in their mortgage lending.  In 2020, whites, who make up 64% of the population, received 65% of all mortgage loans. Asian Americans, who are 6.1% of the population, received 6.5% of home loans.  Latinos share of the home mortgage lending market is about half of their demographic representation with 9% of home mortgage lending though 17% of the adult population.  Blacks are at 5.2% and Native Americans are at .4% of the home mortgage lending market, less than half their demographic representations.    

If it weren’t for federally backed mortgages like Federal Housing Administration (FHA), Veterans Administration (VA) and Rural Housing Service (RHS) loans, Latinos, African Americans and Native Americans would have an even smaller share of the home mortgage market. Almost 60% of Black home purchase applications were through these government programs in 2020. For Latinos, it was about 50%. The private home mortgage market continued along the path of maintaining racial homeownership disparities with a 42% Black homeownership rate, a 47% Latino homeownership rate, a 51% Native American homeownership rate, and a white homeownership rate of 73%.  

When looking at LMI neighborhoods as a whole, we see the private market also failing to meet the needs of this larger market. The 2020 HMDA data shows that the private mortgage market originated only 13.7% of home loans to these neighborhoods although these areas represented 30% of neighborhoods. This failure to serve LMI neighborhoods re-enforces racial economic inequality, with 63% of LMI neighborhoods being a majority of people of color

In the new report, NCRC recommended a set of housing reforms to address the racial disparities in homeownership that the nation has failed to address over the last 50 years. These suggestions include: 

  • Expand the Community Reinvestment Act to explicitly evaluate racial/ethnic equality and how banks serve people of color and majority-minority communities.
  • Rally around a 60% homeownership goal for African Americans, Latinos and Native Americans and take the necessary action to achieve that goal.
  • The Consumer Financial Protect Bureau should require lenders that report loan purchases to report any demographic data collected by the loan originator. Close a loophole that allows no reporting of demographic data for purchased loans.

Racial economic disparities have been at the foundation of inequality in our nation before it even became an independent country. It is long past time for bolder actions to address racial economic inequality and bridge inequality in homeownership, which is an important part of bridging the racial wealth divide.

Dedrick Asante-Muhammad is NCRC’s Chief of Membership, Policy and Equity

Photo by Kindel Media from Pexels

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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