HMDA data paints a sobering picture of black ownership in 2019

The recent murder of George Floyd and its emotional aftermath has brought racial inequality to the fore.

The Latest Home Mortgage Disclosure Law data, summarized in a report from Consumer Financial Protection Bureau Thursday, sheds some light on the state of black homeownership in 2019, and sadly, it’s not terribly surprising.

Black homeownership rose slightly in 2019, but lagged far behind Asian, white and Hispanic homeownership, the report said.

Specifically, the share of black borrowers in home purchase loans increased slightly to 7% in 2019 from 6.7% in 2018. This is the sixth consecutive year of increases. Meanwhile, the share of non-Hispanic white borrowers in home purchase loans was 60.3% in 2019, down from 62% in 2018.

Perhaps more concerning, similar to previous years, black and white Hispanic borrowers had significantly higher rejection rates in 2019 than white and non-Hispanic Asian borrowers. For example, decline rates for conventional home purchase loans in 2019 were 16% for black borrowers and 10.8% for white Hispanic borrowers. In contrast, rejection rates for these loans were 8.6% for Asian borrowers and 6.1% for non-Hispanic white borrowers.

On the positive side, home purchase application denial rates declined overall in 2019 compared to 2018. However, the rate of decline varied by racial/ethnic group and loan types. For example, for conventional and unconventional applications combined, rejection rates for non-Hispanic whites fell from 7.9% in 2018 to 7.0% in 2019 (a 1% drop) compared to a decline more low (8%) for blacks, from 17.4% to 15.9%.

The reason for such a discrepancy, according to the report, “may stem, at least in part, from credit risk factors” such as credit history, total monthly DTI (debt to income) ratio and combined loan. to value (CLTV).

Historically, lenders could, but were not required to, report up to three out of nine potential reasons for denying a mortgage application. The 2015 HMDA rule changed the reporting of denial reasons from optional to mandatory, required the reporting of up to four denial reasons, and added a mandatory text field to be completed when declaring a denial for “ other » reasons.

According to the report, the DTI ratio was the most common reason for denial of home purchase applications. Earlier this week, we reported how the CFBP announced two notices of proposed rulemaking around what is commonly called the QM patch. One of these regulations would remove the debt-to-income ratio requirement from qualifying mortgages.

Another data point that stands out regarding minority borrowers is the incidence of higher priced loans. According to the report: “As in previous years, black and Hispanic white borrowers were more likely to have higher priced conventional and unconventional loans in 2019. For home purchase loans, 22 .3% of loans to black borrowers and 23% of loans to Hispanic white borrowers were more expensive, compared to 8.3% of loans to non-Hispanic whites. For refinance loans, 7% of loans to black borrowers and 6% of loans to white Hispanic borrowers were more expensive, compared to 3.4% for non-Hispanic whites. »

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