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Study: 62 percent drop in home mortgages to minorities

Kenneth J. Cooper | 2/15/2011, 10:50 p.m.

“Since the meltdown, there is no question that credit has constricted across the board,” Zigas says. “It’s even more difficult for minorities and low-income people.”

The report, entitled “The Foreclosure Crisis and Racial Disparities in Access to Mortgage Credit 2004-2009,” illustrates disparities by race and ethnicity. The study uses data banks submitted to the Federal Reserve under the Home Mortgage Disclosure Act and analyzes racial-ethnic patterns in prime, subprime and FHA loans, which together constitute the vast majority of the market.

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 at about $128 million, with the difference being equivalent to one modest mortgage.

“Analyzing the issue of access to mortgage credit by race is significant because of the central role homeownership plays in building personal wealth,” Rep. Maxine Waters (Calif.), ranking Democrat on the House subcommittee on capital markets and government sponsored enterprises, says of the report in an e-mail. “As a 2010 study from Brandeis University illustrates, for example, the wealth gap between African Americans and whites is only growing larger, having quadrupled over the course of the last 23 years.”

The financial stresses that accompanied the recession meant many Americans from all racial-ethnic groups did not apply for mortgages. When they did, applications by African Americans and Hispanics for the best loans were approved or, in bankers’ language, “originated” much less often. On average, whites were twice as likely as blacks to obtain prime loans, and one-and-a-half times more likely as Hispanics. Almost no disparity existed between whites and Asians.

The disparities extended even to subprime loans which, despite concentrations in minority neighborhoods, went mostly to white borrowers. During the six-year period, whites received more than 60 percent of these high-cost loans, which are most likely to lead to defaults and foreclosures.

But disproportionate numbers of subprime loans did go to minorities. African Americans were three-and-a-half times more likely to have one as whites, and Hispanics about twice as likely. By 2009, even the subprime market had dried up for the two minority groups, with lending to African Americans since 2004 down by 95 percent and to Hispanics by 92 percent, compared with 87 percent for Asians and 81 percent for whites.

Jourdain-Earl concedes that the big drops in subprime loans to the largest minorities could be interpreted as a positive development, but he adds in an interview: “At this point, African Americans and Latinos are not even able to get high-cost subprime loans.”

The lending field was more level for mortgage loans backed by the Federal Housing Administration, which spokesman Brian Sullivan says has seen its share of the mortgage market jump from 3 percent to 30 percent since 2006. Compared with those for whites, loan approval rates were 19 percent lower for African Americans, 13 percent for Hispanics and 9 percent for Asians.