Race Gap on Conventional Loans
African-American and Hispanic borrowers have been largely shut out of the conventional mortgage market, according to a new report from Zillow and the National Urban League. Citing 2012 loan data reported under the Home Mortgage Disclosure Act, along with results from a Zillow poll of 700 mortgage applicants in December, the analysis found that whites accounted for about 69 percent of all conventional mortgage applications. The share of applications filed by blacks was under 3 percent; Hispanics represented only 5 percent.
100 - 69 - 3 - 5 = 23% of new conventional mortgages going to whom?
Black and Hispanic borrowers are far more likely to apply for low-down-payment loans insured by the Federal Housing Administration. About 57 percent of black applicants and 60 percent of Hispanic applicants applied for F.H.A. loans, compared with 30 percent of white applicants.
Access to financing that requires as little as 3.5 percent down is key for minority applicants, who on average have lower incomes and credit scores than whites, said Stan Humphries, Zillow’s chief economist. They also have far lower rates of homeownership, which makes it harder to accumulate wealth over time and across generations. “Higher down-payment requirements have had the biggest impact on minority applicants for conventional mortgages,” Mr. Humphries said. “They just don’t have the savings nonminority groups have.”
And their conventional mortgage applications are more likely to be denied. One in four black applicants were turned down, compared with one in 10 white applicants, the report said.
As conventional lending standards have tightened, F.H.A.-backed loans have become crucial to maintaining credit access in minority communities. But at the same time, Mr. Humphries said, F.H.A.’s dominance among such borrowers hints at a problematic trend: “a different path to financing based on your race and ethnic group.”
And the F.H.A. path can be costly. Although F.H.A.-backed loans offer the initial advantage of less money down, their mortgage insurance premiums are considerably higher than premiums on conventional loans.
Julia Gordon, the director of housing finance and policy at the Center for American Progress, a liberal research group, has concerns about what she calls “the dual housing market,” and says she believes the conventional market ought to be making lower-down-payment loans more widely available. “Like all the other separate-but-equal arrangements,” she said, “this is not good for consumers or the market or for taxpayers. We are seeing creditworthy people who should be able to get loans in the conventional market but can’t.”
Ongoing discussions in Washington about how to wind down Fannie Mae and Freddie Mac should include a commitment to ensure that lenders make credit available equitably, she added.
MOZILO! thou shouldst be lending at this hour:
Exurbs have need of thee: they are a fen
Of prudent finance: kitchen, bath, and den,
Fireplace, the heroic wealth of marble shower,
Have forfeited their late-lost subprime dower
Of higher leverage. We are low-debt men;
O raise us up, return to us again,
And give us zero down liar loan power!
Thy face was like an Orange, and golfed a lot;
Thou hadst a voice whose sound was like TV:
Pure flapdoodle, correct politically,
So didst thou at Sherwood Country Club play,
In devout PCness; and yet thy stock
The lowest return on investment did pay.
Here's the original:
MILTON! thou shouldst be living at this hour:
England hath need of thee: she is a fen
Of stagnant waters: altar, sword, and pen,
Fireside, the heroic wealth of hall and bower,
Have forfeited their ancient English dower
Of inward happiness. We are selfish men;
O raise us up, return to us again,
And give us manners, virtue, freedom, power!
Thy soul was like a Star, and dwelt apart;
Thou hadst a voice whose sound was like the sea:
Pure as the naked heavens, majestic, free,
So didst thou travel on life's common way,
In cheerful godliness; and yet thy heart
The lowliest duties on herself did lay.