WASHINGTON, DC -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.
Together, African-Americans and Hispanics were able to borrow 62 percent less to buy or refinance homes in 2009 than in 2004, before the market crashed, the computerized analysis finds. With lenders imposing tighter credit standards, mortgage dollars going to non-Hispanic white borrowers also declined, though by considerably less, 17 percent. Asians fared best, obtaining nearly an equal amount in mortgages.
The study, to be released this week, was conducted by Maurice Jourdain-Earl, founder and managing director of ComplianceTech in Arlington, Va., which advises financial institutions on fair lending practices. The study also found wide racial-ethnic disparities in how often financial institutions approved mortgage applications and made mortgage loans during the six-year period.
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 study concluded that a “dual mortgage market” has emerged, with white and Asian borrowers having better access to lower-cost mortgages than African-Americans and Hispanics, who on average pay more to own or refinance a home—if they can obtain a mortgage.
“The higher cost for mortgage credit translates into less money for basic necessities,” Jourdain-Earl writes. “The higher cost for mortgage credit also translates into African Americans and Latinos having lower homeownership rates and lower opportunities to build wealth, lower educational achievement and higher unemployment.”
Reasons for the lending disparities are not directly reflected in the national data, which do not include credit scores of borrowers or ratios of loan amounts to values of homes. Nor does the Federal Reserve Bank collect information on foreclosures by race and ethnicity.