March 29, 2013

Hispanics delinquent on mortgages 4.7 times as often as whites

Going on a half dozen years after the mortgage meltdown that began in 2007, the evidence continues to trickle in about the key role of diversity in the disaster. Granted, there's very little demand for hard-headed analyses. Here, for example, is a paper finished in 2011 that has, according to Google, been cited once:
Mortgage Default by 2009: Effects of Race, Ethnicity and Economic Standing During the Boom Years  
Heather Luea
Vanderbilt University  
Adam Reichenberger
Bureau of Labor Statistics  
Tracy Turner
Kansas State University 
Abstract: This paper examines the determinants of 2009 mortgage delinquency by race and ethnicity using new household-level data on mortgage distress from the Panel Study of Income Dynamics. Controlling for homeowner and loan characteristics as well as residence in a nonrecourse state, we find startling differences in mortgage delinquency rates that cannot be explained by observables. The unexplained black/white gap corresponds to a 44% higher likelihood that black homeowners will be delinquent on their mortgages relative to non-Hispanic white homeowners. The unexplained difference in Hispanic mortgage delinquency relative to non-Hispanic white homeowners is even greater, at double the black/white delinquency gap.

... The economic decline that began in 2007 was preceded by nearly two decades of government-aided, rapidly rising homeownership rates among minority households (Bostic and Lee, 2007). Given this and the severity of the recent economic crisis, it is important to understand the extent to which minority households have weathered the crisis as well as non-Hispanic white households, all else equal. Indeed, the recent and historical role played by the US government and nonprofit agencies in boosting access to homeownership by underrepresented groups makes understanding these groups’ outcomes particularly relevant.4 
Footnote 4: As recently as June 2002, President Bush announced a goal of closing the homeownership gap for minority households by 5.5 million households by the end of 2010 through innovatiosn such as zero-down-payment loans. That administration's efforts followed more than a decade of housing market interventions, including President Clinton’s National Homeownership Strategy, a trillion dollar commitment by Fannie Mae, the Campaign for Homeownership of the Neighborhood Reinvestment Corporation, and expanded lending to low-income and minority households in part as a result of the implications of the Community Reinvestment Act (Turner and Smith, 2009). 
... As a preview of our findings, we find that black and Hispanic households that own their housing in 2005 are significantly more likely to become delinquent on their home loans by 2009 than non-Hispanic white homeowners. We find an unconditional, weighted likelihood of delinquency of 11.3%, 16% and 3.4% for black, Hispanic, and non-Hispanic white homeowners, respectively, making black homeowners 7.9 and Hispanic homeowners 12.6 percentage points more likely to be delinquent than non-Hispanic white homeowners. 

Let's break those delinquency-by-2009 rates out:

Whites: 3.4%
Blacks: 11.3% (3.3X the white rate)
Hispanics: 16.0% (4.7X the white rate)

The sample sizes of 2005 homeowers in the PSID are not huge: 2344 for whites, 810 for blacks and 263 for Hispanics (the number of Hispanics in a long-running longitudinal study naturally lags behind their number in the population). Also this study design excludes the 2006-07 vintage of new mortgages, which were the bottom of the barrel. However:
While the sample size of the PSID may be considered small compared to loan-based samples (for example, in the 2009 survey, there are roughly 8,000 households), the PSID has a number of advantages over larger samples that are either not household-based or not longitudinal. First, importantly, the unit of observation is the household, and the PSID collects extensive household-level data on employment, income, wealth, and housing costs and characteristics. In 2009, for the first time in the history of the PSID, survey respondents were also asked questions regarding mortgage delinquency and foreclosure, making this a dataset well suited for our study. Second, the PSID is a longitudinal dataset following families from as early as 1968 to present. Using the PSID, we have borrower and loan characteristics overtime, which to our knowledge are data not available in any other single dataset. Third, once sample weights are applied, the PSID is a nationally representative sample of the US population.

Statistically adjusting for all the info in the PSID, it turns out that there are still substantial racial gaps in staying current on mortgages:
Conditioning on extensive borrower and particularly loan characteristics reduces the race and ethnicity gaps in mortgage sustainability considerably, but does not entirely eliminate these gaps. In the full specification, we find that black and Hispanic homeowners remain 1.5 and 3 percentage points more likely to be delinquent than non Hispanic white homeowners, respectively. These unexplained effects are  large relative to the underlying mortgage delinquency rate of 3.4% for non-Hispanic white households.

In other words, statistically adjusting for everything they can come up with (e.g., income), there are still unexplained racial gaps:

Whites: 3.4%
Blacks: 4.9% (1.44X the white rate even after adjustment)
Hispanics: 6.4% (1.88X the white rate after adjustment)

In many ways, the first set of numbers is the more important. As the population shifts from whites to Hispanics, the delinquency rate would tend to get worse. 

But the second table can help explain why money-hungry but politically true-believing lenders like Angelo Mozilo of Countrywide could mess up so badly. You are not allowed to use race/ethnicity in credit modeling, but it turns out that race/ethnicity still matters a lot even in cases where the facts you are allowed to look at are all the same. During the 1990s, Mozilo became convinced that it was sheer racism to worry that Hispanics could default at higher rates than the model predicts.
We find startling differences by race and ethnicity in mortgage delinquency rates that cannot be fully explained by observables ...
The homeownership rates of black and Hispanic households have been and remain substantially below that of non-Hispanic white households. That certain groups experience low homeownership rates is cause for concern particularly to the extent that these gaps are involuntary and in light of the possibility that homeownership generates private and community benefits (i.e., Turner and Luea, 2009; Haurin, Dietz, and Weinberg, 2002). Belief in the positive externalities of homeownership has motivated substantial efforts in the past two decades to boost the homeownership attainment of underrepresented groups, and these efforts have generated relative gains in minority homeownership (Bostic and Lee, 2007). Evidence is mounting that the Great Recession has adversely impacted minorities to a greater extent than non-Hispanic white households. It is likely that the economically disadvantaged households that are losing their homes are some of the same households propelled into homeownership through federal assistance to begin with. If there is a silver lining, it may be that, according to recent work by Molloy and Shan (2011), post-foreclosure households on average do not end up in either less desirable neighborhoods or more crowded living conditions than what they experienced as homeowners. Determining the extent to which housing policy may have fueled the 2009 differential delinquency rates by minority status and why, and whether these households are nonetheless better off for their homeownership stint, would be valuable information for future policy design.

This might also be valuable information for current immigration policy design.


Anonymous said...

More Hegemonic Disparate Hatefact. This rises to the level of microaggression. Neocons have started wars based on mere rumors of lesser insults.

Anonymous said...

Latinos should be living in FAVELAS like in BRazilllll!!!!

LemmusLemmus said...

I have not seen a statistical analysis, but I would guess that one citation in two years is somewhat above average for a working paper in economics.

Anonymous said...

"Rising to the level of microaggresion" should be phrase of the century.

Anonymous said...

You need to be somewhat more charitable here. Blacks and latinos, lacking any sense of financial reality, were easy marks for mortgage companies who knew they couldn't afford the mortgage.

Oishi's dog said...

"In other words, statistically adjusting for everything they can come up with (e.g., income), there are still unexplained racial gaps"

- Frankly, I don't think its accurate to adjust away differences in things like income or overall wealth. They have roots in factors such as intelligence, foresight, delayed gratification, self-disicipline, etc. which differ between the races.

It's like saying if you factor out the difference in physical traits like strength, as well as athletic ability of the average NFL player, he only plays football a little better than me.

Anonymous said...

Perhaps a clue to the future of the US home mortgage market is the current Mexican home mortgage market. In Mexico most home purchases are with CASH. Many Mexican realtors have NEVER done a deal with a mortgage. Currently gringos are required to cough up high down payments for Mexican real estate, commonly 35%. That's for a gringo with a US source of income. Imagine how difficult it is for a middle-class Mexican to get a mortgage. Mexican lenders seem to know something we don't.

Anonymous said...

As I keep hectoring on here, no doubt to Steve's annoyance, but due mainly to the fact that the world will simply not listen, the key to it all, (despite the falsehoods, lies and damned lies that seem to be the stock-in-trade of toay's new breed of 'economist' nation-wreckers), is productivity.
Namely if the immigrating (or infesting) population has a substantially below-par level of productivity vis-a-vis the host nation, then the host nation's only real measure of 'wealth' ie GDP per capita declines ie all you do is end up with more paupers than you would have if you didn't let the dog-shit from the WSJ or The Economist stop your eardrums.
- Importing paupers, agood policy? who have thunk it?

At the end of the day all America got out of following the WSJ Yellow Brick Road was a shitload of icorrigible, generational paupers, the re-annexation of the Golden State, a crashed economy and oh, crashing Europe into the bargain, a crash so damned severe that Europe probably won't rise from it again in any meaningful ethno-European way.

Old Rebel said...

"This might also be valuable information for current immigration policy design."

Wrong. Because when we pass amnesty and bring people from out of the shadows, they will magically transform into American citizens who will vote Republican and join the Jaycees.

Claudia Z said...

This can only mean one thing: Hispanics needs more social and economic support. They haven't achieved parity with whites economically, socially, and politically. That's why this is happening.

Anonymous said...

Quebecois here.

There was lots of money to make in real estate, especially if you could manipulate the market as to create a bubble. For this, you need lots of capital floating around worldwide, friends who'll make sure lending rules are relaxed, other friends that'll make sure ratings agencies look the other way, and new bodies, i.e. people with no homes willing to buy one especially if it's almost given to them. Hence those Hispanics.

Oh, as a finishing touch, you also need other friends that will make sure any losses incurred when the bubble bursts are picked up by the government, aka the taxpayers.

Most readers here will have no doubt figured that all these various 'friends' are in fact the same bunch of people.

nooffensebut said...

Dr. Turner's Web page says that it is "under review." No journal has published it, yet.

Gordo said...

The latest UK Govt policy, announced last week, is to guarantee mortgages for people who cannot afford a deposit.

Sound familiar?

peterike said...

The unexplained black/white gap.... The unexplained difference in Hispanic mortgage delinquency....

UNEXPLAINED?? Well shut my mouth.

Anonymous said...

FYI--Lawrence Auster died today.

Anonymous said...

Anonymous said...

"This might also be valuable information for current immigration policy design."

I love your droll asides.

Anonymous said...

"In other words, statistically adjusting for everything they can come up with "

they need unz on the case.

pat said...

They say that "no news is good news". May I respectfully submit that this is "no news".

When you find that blacks have a murder rate seven times that of whites and Hispanics about three times. Or you point to unemployment or welfare dependency rates or charitable contributions, number of inventions, or many many other phenomena, you are just giving examples of the same simple phenomenon - racial differences in IQ.

They call in 'g' for a reason.


C. Van Carter said...

Hispanics victims of predatory lending 4.7 times as often as whites.

Anonymous said...

What's the white hispanic disparity in foreclosure rates when looking at households given mortgages with the same interest rates? Is there evidence that hispanics were discriminated against or in favor of in that a white family with the same interest rate would be more or less likely to foreclose on average?

Anonymous said...

Just one more example of what a disaster large scale Hispanic immigration has been to America.

Anonymous said...

Any stats on white hispans vs non-white hispans?

Auntie Analogue said...

Just a brief pause here to pass the word that this Good Friday morning at 0356 EDT, Lawrence Auster died. Requiescat in pace.

Anonymous said...

I hope you've all noticed that not ONE Indian from Calcutta who used to call a sidewalk their home, defaulted!

Obviously, that calls for more to arrive on our Golden Shores; as many as possible! ASAP!

Thankfully, there are hundreds of millions prospective new home buyers.

Our economic worries are over!

Mr Lomez said...

"Hispanics victims of predatory lending 4.7 times as often as whites."

I get that this is meant as a joke, but it's at least as true as it is ironic. It seems likely to me that one of the major reasons these statistics look the way they do is because blacks and Hispanics were routinely suckered in to bad mortages they didn't understand the terms of. Whites, for a variety of reasons, were never as easy a mark.

This, compounded by the CRA, and the fact that post-bubble, these same blacks and Hispanics who were overreaching on their new digs out in the sprawl to begin with, were among the first to lose their jobs.

C. Van Carter said...

If banks don't give mortgages to browns it's redlining, if they do it's predatory lending.

anony-mouse said...

So how come the financial crisis never hit Mexico?

For that matter, how come Mexican banks stay in business?

Denhart said...

"Hispanics delinquent on mortgages 4.7 times as often as whites"

-But hey, they bring so much VIBRANCY! And apparently only people of color and butt cowboys complement Buzz on his fruity threads, and in the end, that's all that really matters, right?

World Council for the Suppression of Crimethink said...

""Rising to the level of microaggresion" should be phrase of the century."
We're working on it.

Anonymous said...

I want to know what % of black, brown, white were putting 20% down and what the data shows for default in that subset of mortgages.

Anonymous said...

A gain of 14,300 jobs in February helped push Orange County’s unemployment rate down to 6.5% from a revised 7.1% in January.

The rate was 8.1% a year earlier.

Orange County now has 1,411,200 jobs, according to the state Employment Development Department. That’s a growth of about 2.6% over the past year.

Government added 5,000 jobs last month, more than any other sector. About 82% of the overall increase came in local government education services.

OC now has 151,100 government jobs, a total that lags the year-ago figure by 600, or less than 1%.

The professional and business services sector added 4,600 jobs in February, with nearly 90% of the growth attributed to new hires in administrative and support services.

The sector has expanded by 4% over the past year and now counts 257,200 jobs, which make up 18% of OC’s total employment base.

Leisure and hospitality reported adding 3,900 jobs. About 3,200 were jobs added in food services and drinking places. The sector counts 8,200 more jobs than a year earlier, for a total of 181,200.

The educational and health services sector grew by 2,900 jobs last month. It now has 169,900 jobs, a 4.5% growth year over year.

Financial services firms added 1,000 jobs in February. The sector has grown the most over the past year in terms of percentage, at 6.1%, and now has 111,900 jobs.

Companies in the trade, transportation and utilities sector combined for a loss of 3,300 jobs overall. A dip of 1,900 jobs among general merchandise stores led the overall decrease. Scattered gains within the retail trade segment—including hires at grocery stores and courier services—helped offset a larger drop.

The trade, transportation and utilities sector now has 243,100 jobs, about flat from a year prior.

Construction companies here cut 1,000 jobs last month. The sector has grown about 3% over the past year, and now has 70,700 jobs overall.

The jobless rate for California was 9.7% in February, down from 10.4% in January and 11.3% a year earlier.

The nationwide rate was 8.1%, compared with 8.5% in January and 8.7% a year ago.

Construcation is up and down and some service jobs are keeping legal and illegal hispanics but with the construcation sector down by aboout 30,000 in Orange County and the same in other states it makes it more diffcult for blue collar and illegal to get certain jobs.



Cable Business Journal Videocast

Scott McGregor, president & CEO of Broadcom

OCBJ Publisher Richard Reisman interviews OC

Anonymous said...

Ok, I read the paper. Basically it appears blacks and Hispanics had no savings and not enough income to cover mortgages with breathing room to spare. Not sure why encouraging better saving wasn't on the table. Because what, then blacks and Hispanics would be purchasing a few years later than whites and that's raciss?

Anonymous said...

Los Angeles Times has a great graph of county unemployment in the state, the counties with the most Mexican adult populations have high unemployment the far north inland is also high unemployment but there has not been much jobs there for years. The Coastial counties from Orange to San Fran and South to San Diego have the lowest unemployemnt. La county is the exception since it has a higher number of Hispanics in the adult population than San Diego or Orange its closer to Riverside and San Bernadino over 10 percent. La has been recently exporting a lot of Hispanics to the Inland Empire.

Anonymous said...

"So how come the financial crisis never hit Mexico?"

You mean this particular one? Because financial crises are a recurring thing in Mexico.

For that matter, how come Mexican banks stay in business?"

The same way American ones do. Political influence.

Steve Sailer said...

"It seems likely to me that one of the major reasons these statistics look the way they do is because blacks and Hispanics were routinely suckered in to bad mortages they didn't understand the terms of."

Right. Gretchen Morgenstern had a detail about how the Countrywide office in Santa Monica barely broke even while the office in Inglewood under the LAX flight path made high profits year after year (at least until the Inglewooders stopped paying their mortgages).

Svigor said...

The obvious response to the poverty excuse is to point out that there's no "ceteris paribus sorting" in the real world. In other words, blacks and browns are poor, and a loan officer (or whatever) can't just ignore the fact that they are (or shouldn't have to).

Maybe someone else can come up with a pithier way to say this? For crime I usually use "yeah but in a dark alley you don't get to correct for poverty," but I'm feeling lazy at the moment.

Svigor said...

It's like saying if you factor out the difference in physical traits like strength, as well as athletic ability of the average NFL player, he only plays football a little better than me.

That's a great analogy. Even the typical innumerate, politically-retarded white American can understand it.

Anonymous said...

Alternative fuels play an important role in meeting California’s growing energy needs. Our state is the leader in renewable energy technology. But, even with our impressive clean energy achievements, California’s economy will rely on fossile fuel energy for the foreseeable future to fuel our cars, move our freight and power public transportation. That is why we can’t ignore the billions of barrels of recoverable oil beneath our feet in California’s central valley.

California is on the verge of entering a new chapter on energy supply – one where both alternative fuels and newly discovered oil supplies put us at the forefront of energy competitiveness. A new study out this week from the University of Southern California and the Communications Institute shows there is a bright spot in California’s economic future: the increased production of energy.

The report “Monterey Shale and California’s Economic Future” highlights the huge, untapped reserves of oil available in the San Joaquin Valley’s Monterey Shale. These 15.4 billion barrels of oil are located largely on the west side of the San Joaquin Valley from Kern County in the south to Stanislaus County in the north. This could have an impact on illegal immirgation since much of this is in agriculural areas of California. Oil Companies are out to buy from farmers. With less farms in the Central Valley the biggest arguement for illegal immirgants will not matter as much since less farms equals less farm workres. Some farmers are already complaing but the oil expansion in Kern County.

Anonymous said...

My brother-in-law is a former illegal from South America who became a realtor in the Washington D.C area. He dealt exclusively with other illegals, telling them not to worry about income, job status, etc, no one was ever going to check. Just get a house, hang on and let it appreciate for a couple of years, then sell it and pocket 100-200k. These people might be a lot of things, but stupid isn't one of them. They knew what the mortgages said and they went along happily expecting to become wealthy by their standards.

Anonymous said...

Blacks were hit in Florida and Georgia. Georgia was also a state with a housing bubble. Ca,NV, and AZ are mainly Hispanic or in the case of Ca more Asian than Black.

Anonymous said...

Maybe a lot of Black and Latin American low economic development is that in Mexico common law married is even more exceptable than in the states and according to Allen Wall adultery is seen more ok if the woman is not married. Wall lived in Mexico. So, a lot of men in Mexico are not as committed to their offsrping in least in terms of money than white males, so a reason why Mexican males lack ambition in both Mexico and the state to make more money.

Rakesh Mathur said...

Government Universities provides dedicated team and space for Research and Development while private universities do not focus on providing such dedicated team and space for Research and Development