Lending to blacks, Hispanics plummets during housing crisis
By Kenneth J. Cooper February 14, 2011 8:34AM
Updated: September 24, 2012 6:25AM
Since the housing market collapsed, mortgage lending to African Americans and Hispanics has plunged precipitously — by more than 60 percent, according to a new study of loan information that banks submit to the federal government. The study, using Federal Reserve data, was conducted by Maurice Jourdain-Earl, founder and managing director of ComplianceTech in Arlington, Va., which advises financial institutions on fair lending practices. Mortgages made to Hispanics have decreased the most, by 63 percent, to $78 million in 2009 from $214 million in 2004. Lending to African Americans has dropped to $49 million from $122 million, or 60 percent. Whites have been affected much less and Asians barely. New mortgages to white borrowers declined to $1.1 billion from $1.3 billion, or 17 percent. Lending to Asians stayed almost the same. Whites were about twice as likely as African Americans and Hispanics to be approved for prime mortgages with the lowest interest rates, while members of the two largest minority groups were two to four times more likely to receive subprime loans, which have higher rates. By contrast, the disparities were much narrower for loans insured by the government’s Federal Housing Administration, which has attracted a growing number of borrowers during the credit crunch. “The higher cost for mortgage credit translates into less money for basic necessities,” Jourdain-Earl writes. Reasons for the lending disparities are not directly reflected in the national data, and the Federal Reserve Bank does not collect information on foreclosures by race and ethnicity. Jourdain-Earl raises the possibility of an unknown degree of discrimination, noting an “erroneous notion” that minorities caused the housing market’s collapse, despite the relatively low amount in mortgages they received, compared with those for white borrowers.
The Mortgage Bankers Association declined to comment on the report because, spokeswoman Melissa Key said, “The author does not control for any of the factors that could lead to rate or approval differences across borrowers.” Chris Herbert, research director of the Joint Center for Housing Studies at Harvard University, says the report has limitations in explaining why minorities fare less well in the housing market, a trend he acknowledges. In response, Jourdain-Earl said, “I wasn’t trying to ascertain the why but to shine a bright light on the outcome and the effects on wealth and home-ownership rates.”
