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Minorities get fewer mortgages. But is that bad?
November 2nd, 2009, 1:00 am · 79 Comments · posted by Mathew Padilla
National Mortgage News reports that Home Mortgage Disclosure Act figures for 2008 show that minorities “were big losers in the market contraction last year.”
And with credit still tight, the outlook for minority access to home loans this year and next looks bleak.
But is that a bad thing?
Subprime lending enabled more minorities to become homeowners during the boom, but many of those folks got mortgages they couldn’t afford. The result: record foreclosures.
Mark Fogarty writes:
Lenders made $342 billion in mortgages to minorities last year, out of a total of some $2.1 trillion. That’s just 17% of the total, down from 20% in 2007 and 22.6% in 2006.
With the U.S. having a minority population of 33% in the 2000 Census, much of the progress made toward serving the underserved market in recent years seems to have unraveled.
The vaporizing of the subprime mortgage market, which targeted minorities (for better or for worse) is a major factor in the downturn. The merger of Countrywide Home Loans, Calabasas, Calif., and Bank of America, Charlotte, N.C., last year may have had some impact as well, as Countrywide lost its spot as top lender to minorities last year after many years of holding the lead position.
…
Lending to Hispanics fell by more than half, from $266 billion to $130 billion. African Americans also registered a sharp drop in mortgages last year, from $170 billion in 2007 to $96 billion, a more than 40% drop in dollar terms. Asian mortgage loans dropped to $95 billion from $145 billion in 2007, or approximately a third.
So what do you think of the data. Here’s a two-part survey:
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No its not a bad thing. Homeownership is not a right but a privilege for those that work hard and save their money. Can’t save enough for a downpayment? Look for ways to increase your income with new skills/education. Homeownership is a reward.
I am a 2nd gen mexican american and as a kid my parents worked hard and saved enough money to buy a big house in a nice oc neighborhood. They didn’t need a government program to help them buy a house.
“Look for ways to increase your income with new skills/education.”
and a lot of this is preceded by learning to speak English; they go hand-in-hand. I know from experience, as a few of my in laws do not speak it. but mostly, those few came when they were very old and were less able to adapt. their kids speak it and are all pretty highly successful.
Increase my skills for a new trade, in order to be able to buy a home?
When all the jobs are going to the minorities, my chances are slim to none in finding a good paying job!
Well said!
I dont get it, so because minorities cant afford to buy a home they deserve a break? Where is the logic in that? I thought home ownership was supposed to be something you busted your butt to get thru hard work and planning.
I cant afford a home, I am not a minority. But I am saving money and planning on buying a home in 5-10 years.
SO where is the real problem here? There are some things our govt just needs to stay out of. If a person cant afford something too bad.
If they want it bad enough they can work to get it.
That is what USED to make America great, people with limited means using their minds to create and do things that enable them to excel in life.
Now we just pass out freebees or breaks so its no wonder people are too damn lazy to do the work needed to succeed, where is the equality in that.
agreed, one does not necessarily have anything to do with the other. hmm look so-and-so can’t afford it THEREFORE the system (hard work, careful planning) MUST be broken and we must “fix” it, at great expense and risk to everyone else, mind you.
You can afford a home in the midwest, they’re a dime a dozen and you get lots of land and a good sized home.
I would be interested to see this data indexed against income. Is it a race or a socio-economic issue.
My guess is it’s closely correlated to socio-economics.
Getting people into mountains of debt is not “helping” them. A living wage would help. Better education would help. Social programs would help. A mountain of debt does not help.
An apartment is still a home. The government talks about “making homes affordable.” Apartments are homes and are affordable. What the government doublespeak really means is “Putting poor people on the hook for thousands of dollars in interest payments.” A home with a mortgage is housing with a pimp. They’re paying out money every month for nothing but debt service. That’s money they desperately need for something else.
The best thing for this country would be if NO ONE could get or wanted to get a mortgage. Home prices would become affordable right quick. And the banksters salaries would soon fall more in line with everyone else’s.
Pay cash. Screw the banks.
There should be equal opportunity and those programs that backfired were supposedly about that, but as some others have said, it sure isn’t doing anyone a favor to help them get a loan that they can’t afford to pay.
That said, it has been reported that at least on car loans, not sure about home loans but I think there as well, that some put people into subprime loans who could have qualified for better.
Of course now there are ways to get started in owning a home such as buying a condo or townhome. Although even there caution needs to be exercised. I was told that my neighbors who just bought a couple of years ago and then a earlier this year apparently bought another place are going to be losing this place which is rented. They are not minority.
So they need to ensure that people are treated fairly, but they have all the HMDA data that is required to be submitted with loan applications as to the racial and ethnic characteristics of the buyers as well as their sex. I guess all that is supposed to enable regulators to discern patterns.
Of course one problem with that is if the person declines to state, the person taking the application is required to give it their best guess. I have found that my guesses on people’s ethnic background are sometimes quite off the mark. One woman I had worked with and thought was Latina was actually Polish and some type of Asian if I recall correctly. And I have a friend now that I thought was Latina but who is from Afghanistan.
I do think that homeownership is a good thing as long as one doesn’t take on more than he can afford, considering any rate adjustments to come. It also gives you more control over housing costs as when times are good, rents can skyrocket and be raised every year.
the sense of entitlement is one of the biggest problems the US faces.
driving a car is not a right, it is a privilege.
owning a home is not a right, it is a privilege.
having a job is not a right, it is a privilege.
Agreed, but I’d like to add one:
Having insurance is not a right, it is a privilege.
Whooo hooo. Move over Pelosi, here comes Amanda!!!
very true. there are very few inalienable rights (which is redundant, but it helps to be reminded that rights are by definition inalienable).
Shouldn’t having good health, the right to live and earn a living be a right? I think thats the meaning of right to life, liberty and the pursuit of happiness. You dont have a right to have certain things like a house or a car, but the opportunity to get them should be there. And dying or being crippled because you dont have health insurance I am pretty sure infringes on that.
nope. I dont believe that everyone is entitled to a job. entitled to a fair chance at a job based on qualifications, yes. but just because someone exists doesnt mean someone else should be forced to hire them (or more importantly: keep them hired)
cause if that were the case, I’d find a job where they were forced to keep me and I’d just show up when I wanted - not when I was scheduled. it’d be impossible to fire me!
How can having good health be considered a right since even if you have the best health care in the world you can not be guaranteed good health? I’m sure that Ted Kennedy had access to the best health care available but he got brain cancer and died from it.
I’m not sure how many people die or are crippled because of not having health insurance. For emergencies everyone is supposed to be treated. I don’t have health insurance and it is not jeopardizing my health. I go to the dr when I need to but avoid going unless I need to. A lot of things run their course whether you go to the dr or not. If I feel I need to go get care, I do.
Agreed, but I will like to add some
DEFENDING THIS NATION IS NOT A PRIVILEGE IS MANDATORY. “BEEN MINORITY”
STEALING 50 BILLION DOLLARS WITHOUT DEFENDING THE NATION ” PRICELESS”
TRYING TO BUY A HOUSE WITH YOUR VA LOAN ” IMPOSSIBLE “
WoW!! what a Country HUH?
The only story here is created by the media. The title would be just as accurate if it read “People with poor credit/low income get fewer mortgages”
But i guess every story needs a victim
makes much more sense, but it seems like nonsensical is really the way to go these days.
Of course, BB. No victim, no story.
Actually that is a shortcoming with HMDA data. They do not include credit scores. That would make HMDA a much more useful data set.
And how about the fact that some of it is inaccurate anyway since those taking loan applications are required to give their best guess as to the applicant’s race and ethnicity if the person declines to state. While we can usually figure that out, I’ve found out several times that what I thought was a person’s ethnicity, was in fact wrong.
we saw what happened during the housing boom when government “expands lending programs” to include much higher percentages of minorities and the poor. not good.
Wonder what the percentage of foreclosed homes in the Inland Empire were owned by minorities.
Not just the Inland Empire but what is the percentage of mortgage defaults by ethnic background nationally? That data is surely part of the data set compiled by the Home Mortgage Disclosure Act that is featured in this news story. To my knowledge it has never been released. The question should be why is the data being concealed.
I note the San Jose Mercury News did an unofficial survey in that city and found that 2/3 of all foreclosures were on homes owned by those with Hispanic surnames whereas the city was about 1/3 Hispanic.
I don’t want to make a ‘racial’ issue out of the problem but if we are going to be fed one data set as a ‘news story’ lets see all the data. My guess is that blacks will have a higher default rate regardless of income as that is my experience with delinquent accounts for the utility I work for.
Practice birth control, and go back to school. No one owes you anything.
Good one.
What does this have to do with this article? you are way off topic. Perhaps you should tell that to that clown family that has, what is it now? 19 kids? yeah, those folks are a minority, no one is shaggin as hard as they are.
Depending on which minority. Some minorities are not considered to have “minority status” despite being in the minority. Perhaps the term “minority” should be replaced with “entitled ethnics”, Asians need not apply.
yet Asians mortgages dropped by a third, so the system MUST be broken!! time for more lending programs for Asians! errrrr, wait let’s rethink.
Whites are a minority, at least in this state, but certainly don’t enjoy “minority status”, which is something afforded by the government. yikes
What I don’t understand is why the article didn’t highlight the 30% drop in lending to whites.
because it’s only 3% lesst han other minority groups, and as such is not large enough to be of note!
Lending to minorities also fell as a ratio of all loans made. That is the bigger picture: they have lost market share.
But as I said, they aren’t getting the toxic subprime loans, so could be seen as a good thing.
That’s true, but unfortunately the article implies that that whites picked up that proportion of loans, which might be misleading.
Towards the end of the article it says: “Also, a large number of people just leave the line for race or ethnicity blank. This year the unidentified came to more than $500 billion in mortgages, fully a quarter of the whole total.”
Since they don’t bother to tell what the proportion of blank ethnicity borrowers was the previous year, we don’t know if whites picked up the minority’s previous share or if the blank ethnicity applications picked it up, or both.
Also, since HMDA is collected during the application process, they could have provided analysis on the proportion of minorities that submitted loan applications vs the percent that actually funded. This statistic might be more revealing of systemic racism.
I agree the HMDA stats are incomplete and somewhat inconclusive. Much of the data we use to better understand our economy are flawed. Such is life. The data should be a starting point for debate. That is all.
I’m confused about the article you are referring to as this column does not include that info. I’m wondering how they get away with leaving it blank. Unless they were done by phone or internet where they did not actually do it face to face with the applicant. I am part of a co that takes loans. When we take a loan ap, we are instructed that they HMDA data has to be filled in or we won’t get paid for taking the loan. We are told that if the person declines to state, then after they have left, that we are to fill it in using our best judgment.
I thought that was the purpose of gathering the HMDA data–to discern patterns of discrimination if there are large differences between the # applying vs the # being approved for loans. Of course I guess it depends on how the loans are processed. When I take a loan ap, it goes in with the HMDA data which is then supposed to be separated so that it doesn’t affect the loan processing, but I guess they keep the application # or something so that it can be compared later.
Yes, I thought one of the recent goals of government was to cut down on some of these toxic mortgages, in particular to minorities. so one could even argue that it’s working.
Thanks for the followup comments Matt.
There are plenty of other states that have much lower costs of living - if you can’t afford a home in California, consider moving.
I should note the figures cover the entire US.
That being said, I’d like to know how many people come to places like Arizona for cheaper housing prices and they now have one of the largest foreclosure rates nationwide.
What are you talking about? I know a lot of caucasians who got home loans…
Didn’t learn anything from this housing bubble. Let’s give away easy no doc / no income loans to who ever wants them. I enjoy being a bagholder for Fannie Mae.
Liar Loan- Its not on the OC register’s Agenda.
Pro Hispanic Only ..
I don’t think the OCR is pro-hispanic, but I do question the conclusions being drawn, especially when politicians start using “studies” like these to make housing policy.
I don’t like the tone or title of this article. He should be discussing people in lower income brackets, not racial minorities.
My understanding of HMDA is that the reporting requirements were created to monitor/prevent banks from redlining minority neighborhoods. Has HMDA been effective? Don’t know that. Seems like it is one of those odd political compromises where we don’t get enough data to really know what is going on.
ever wonder why so many minorites are self employed? i.e. Indians running most of the in-out gas convienence stores….the truth is they have no choice, mainstream america isnt hiring them.
I used to work with a whole lot of Far East Indians (and Pakistan). the problem for them is immigration status, they can’t come here and work. but if they start a business, it’s easier to qualify, supposedly.
That’s not entirely true. I work in the aerospace industry and there are a bajillion Indians and Asians at my employer. Employment in my industry here in SoCal equates a lot more with knowledge and training than it does with race.
Gina,
What job do you do? Are you a housekeeper or work in agriculture? I’ve never had to compete with uneducated people whenever I’ve applied for a job. If you are losing jobs to someone who doesn’t speak English, and doesn’t have an education you got issues!
Matthew
Stories like this one is written to fuel the fires that led to the economy woes. Back in 1992 Reno threatened to sue if lenders didn’t lower their standards so that less than deserving people could buy homes. Look what happened. Stop stoking this fire.
Actually my point is that the debacle of the subprime experiment makes now a good time to reevaluate the whole idea that homeownership is a net good to society so much so that it should be facilitated by government programs like FHA, which allows for a 3.5% downpayment.
If prices come down the government won’t need to help people buy homes. More artifical market woes on the way.
Government programs like FHA have been supporting home ownership since the Depression, so I think they have done more good than bad.
On the other hand, the Fed’s policy of keeping rates too low during the 2001 recession wreaked havoc on the housing market. It forced once conservative investors like pension funds and insurance companies to go chasing returns through higher risk investments like Subprime and Alt-A MBS.
First, I agree on the Fed policy.
The FHA was created during the Depression at a time when banks were not in a position to make new loans and hold them on their books. Banks made FHA loans and sold them to Fannie Mae, another Depression era program. Both programs could and arguably should have ended with the Depression. But they did not.
FHA has existed for decades as a small program helping a few folks (relative to overall market) and I guess that is a good thing, though some buyers may have struggled a lot more with their housing expenses than they would have as renters. The accompanying emotional stress is not quantifiable.
But now FHA is being stretched to make up for the collapse of private securitization. There will be consequences.
Yeah, I thought that was clear since you asked, ….but is that bad?
It looks like the Federal Financial Institutions Examination Council will be busy giving out fines to lenders. After all, they have to meet the Community Reinvestment Act (12 U.S.C. 2901 and 12 CFR parts 25, 228, 345, and 563e).
How will we ever improve race relations when we have scare articles like this.
How about some in depth reporting? Maybe the drop in mortgages are due to some minorities (e.g. Asian) being very wise and waiting for better prices?
How about some minority loans dropped because they can no longer lie about their incomes or have their poor credit history ignored?
There’s an implication that is discrimination, but there is absolutely no proof of that assertion. Since when is it the Governments responsibility to ensure every group has the same home ownership rates?
We have a free country, which includes the freedom to make bad choices and not own a home.
If there is overt discrimination, then tackle that problem and fix it. If there is no proof of overt discrimination, then stop using it as a headline.
The biggest minority in this state is people who still have money, equity in their home, and a good paying job. When you look at the people who the banks will loan to now, it IS the minority.
To Mr. Padilla: Are you serious? This article, especially the title, is an embarrassment. I’m not sure what your intentions were because so many of your terms were vague & the article is poorly written, but you seem to equate “minorities” with poor people who can’t afford mortgage payments. Yes, it’s true a large portion of subprime mortgages were taken out by minorities, but there were also a large portion that weren’t. But guess what every person who took out a subprime mortgage had in common? I’ll give you a hint - it’s not their ethnicity. It’s the fact that they didn’t have enough income to afford a prime mortgage. So stop making generalized statements that perpetuate the racist stereotype that minorities are poor, loan defaulters (such as “is it bad that minorities are getting fewer mortgages”). It makes it harder for minorities who earn a good income to get mortgages when they deserve them. Nice job, OC Register, on trying to create controversy to boost your lagging readership.
And btw - mortgages to Asian Americans should not be called “Asian mortgages.”
To the commentators: I agree with you that home ownership is a privilege and not a right. I don’t like the fact that money I earned and pay as taxes goes to subsidize cheap loans to a group of people simply because of the fact that they are minorities. But, I also don’t like articles like this that suggest that the criteria for handing out mortgages should be based on race.
What I have seen from HMDA data during the housing boom is that high-cost loans, or subprime, were heaviest in Santa Ana, much more so than any other city in Orange County. That is a heavily Latino city and also has lower incomes.
Since the housing correction began, Santa Ana has experienced the highest foreclosure rates in the county.
My point is that the subprime loans were bad bets, period. I have encountered several cases in which Spanish speakers talked to a broker or loan officer in Spanish and signed documents in English.
I know this does not absolve the Spanish speakers — one ought never to sign a contract without understanding the terms.
But, still, my focus is on lending abuses. I hope not to see them repeated.
In my neck of the woods the illegal were given loans. Those are the homes that were forclosed. Most never made a payment. They stayed in them until the realtors paid them to leave. Now I get to pay it for them.
By the way I’m Hispanic.
Very true point, the majority of loans that I see at my desk that are in trouble are minorities. However, most of the loans audited were originated by hispanic/asian mortgage brokers.. GO FIGURE!!
“the racist stereotype that minorities are poor, loan defaulters…”
There’s a difference between a generalized statement, which happens to be true, and a “stereotype.” Look it up.
It is absolutely, uncontroversially true that certain ethnic minorities have higher rates of poverty and mortgage loan default than the average rate for the country as a whole. Is it “racist” to make that true statement? If so, why?
Padilla: your topics and reports are usually insightful.
This was not one of them.
The government making it easier for the poor to buy is how we got into this mess in the first place. You should be able to buy what you can afford. If you can’t afford it, you can’t buy. Housing prices would have never jumped with out unqualified buyers.
Favoring people becasue of race is racist…don’t you think?
i don’t know. Are there underrepresented poor whites??????? why don’t you ask Barney Frank and Fannie Mae. unless you forgot to watch the news over the last year, Fannie Mae was the cause of the financial meltdown for this very reason. giving unqualified homebuyers a loan. it is irrelevant if some of these homebuyers are minority.
One thing that bothers me is the classification system itself. Asian, e.g. could mean a poor immigrant or an American of Japanese descent. Who do you think would have a higher default rate or be less likely to quailify for a prime fixed rate loan? Same would apply for Hispanic/Latino. Does it mean a multi generational American living in New Mexico or Texas or a recent immigrant of limited educational background and cultural integration into American society? OTOH black immigrants seem to have fewer of the social pathologies that afflict so many native born blacks and thus might be better risks than the native born American.
Actually some of the recent latino immigrants may be better risks with a culture of hard work and knowing how to get by on little as well as having more of an appreciation for the “American Dream” than many native born Americans. And not all recent latino immigrants are of limited educational background.
But it is too bad when those who do not have a good command of English are ripped off by other Spanish speakers who sell them loans that they will not be able to afford and which they don’t understand. Of course that was not limited to those with language issues, but even more so there.
Of course a partial solution for that would be to make the Truth in Lending Statement more prominent so people would actually see it–maybe even require an estimated one a few days or more before closing so people aren’t suprised at closing. Maybe even along with those early estimated closing cost statements, require an estimated Truth in Lending statement, and then revise it if the person doesn’t qualify for those terms.
Well lets see if you concider (white) being the minority than I say yes government should expand lending programs directed at minorities. If you are talking about the many illegals that are in this country that think that they should be handed everything than I say heck no go back home and buy a house in pesos.
The issue of mortgages is not a racial issue; it is merely an economic issue. Home prices are still well above income levels of local citizens. Once home prices decline to where they align with what people can actually afford, more people from all economic levels will be able to purchase homes. Wealthy people will buy higher end homes, the middle class will purchase medium priced homes, and others will purchase lower priced homes.
Our taxes would have been better served by putting measures in place that would prevent another housing crisis. I also believe that a homebuyer should be required to have a 20% down payment. This would cause home prices to further drop to realistic levels. Future mortgage defaults would also be minimized as homebuyers would need to be more realistic and disciplined to save for the down payment.
I wonder if the writer of this story realizes that “whites” are the minority? Now take another look at this story.
Thomas,
Definition of stereotype from dictionary.com: a conventional, formulaic, or oversimplified conception, opinion, or image
Generalization: a proposition asserting something to be true either of all members of a certain class or of an indefinite part of that class.
I don’t know, sounds pretty similar to me.
I agree with you that statistically, certain ethnicities have higher default rates than others. However, there is a huge problem with saying “minorities get fewer mortgages, but is that bad”:
1) It dumps, or should I say “generalizes,” all non-white groups into one category and labels/generalizes/stereotypes them as bad loan candidates. Not all minority groups have high default rates. You know why? Because someone’s ability to pay off a loan is directly related to income, not to race.
2) It generalizes/stereotypes all members of each minority group as poor, loan candidates. Even if someone belonged to a minority group that statistically was more likely to default, it doesn’t mean that the individual is a poor loan candidate. So you are right - the statistic that certain minority groups are more likely to default is not racist, it’s a fact. But determining whether someone is a good loan candidate based on his/her race - which is what this article does when it asks whether it’s good or bad that minorities are getting fewer mortgages - is racist.
Just read Mandie’s post and realized that I should make something clear to support my argument:
Not every Hispanic person in the US is an illegal immigrant. There are plenty of people of Hispanic descent that are legal US residents or citizens, have good jobs & incomes, and fulfill the financial requirements to qualify for a loan. So when you have discussions about whether it’s bad to give these people loans, it’s ignorant and racist.
Well, that is true that not every Mexican is illegal but on the average Mexicans have less money than whites and the inland empire that has more 2nd and 3rd generation hispanics also had higher foreclostures rates than whites. There were too many loans to people that couldn’t afford the houses. And I appreciate someone bringing this up.
Cynthia,
Yes, I think we can all agree that statistically, the average income for Hispanics (which aren’t the only minority, although this article makes it seem like they are) is lower than the average income for white people. It’s also true that if you separate mortgage defaults by racial group, Hispanics fare worse than whites.
What is wrong, however, is to look at these statistics and determine whether it’s bad to give mortgages to minorities. Why? Because correlation does not equal causation - meaning that being a minority does not cause someone to default on a mortgage. So, if a loan officer had to assess an applicant’s eligibility for a loan, it would be really stupid for him/her to make minority status a factor when deciding whether to give the loan. Along the same lines, it’s stupid for us to decide whether it’s bad or good that minorities are getting fewer mortgages because belonging to a large group that has higher default rates has no bearing on whether or not the individuals in that group can afford mortgage payments. In short, just because you see that more minorities are defaulting doesn’t mean that it’s good that it’s more difficult for all minorities to get mortgages. This article should read, “Lower income bracket gets fewer mortages.”
What I would appreciate, Cynthia, is for you to think more analytically about what you are saying.
Well does anyone imagine that a legacy of institutional discrimination, still has an impact for many generations to come? No, of course not, the playing field is even, even if one team for many years had all the advantages, and the other was denied access to any of it. Surely once the rules change, everything is immediately rectified, all the former wrongs, are completely righted.
The problem is that what happens to ONE generation impacts the next.
And to erase that impact, much more has to be done, than the sort of LIP SERVICE that has taken place. Minorities REMAIN disadvantaged, which better accounts for their continuing to face discriminatory practices, having access to only POOR OPTIONS, and yet a willingness to take those risks, since there is nothing better on the horizon, anyways. Who loses their jobs first? Which communities lack sustainability? Where are defaults highest? Gee big surprise, whodda guessed.
@Cathy- Thank you for a logical and well reasoned explanation of this article.
@Cee- Good and valid comments. Many people do not understand the true impact that instiutional discrimination has on a group. It is generational and ongoing. It will take many generations to reverse its effects.
What Mr. Padilla also fails to mention or take into consideration is that despite some minority loan applicants having stable work histories, a good income and good credit, they were STILL offered subprime loans. Even if a two income family could afford the ARM mortgage they signed up for at the beginning, many of these families could no longer afford them when they doubled or even tripled the following year.
I do believe that homebuyers people need to educate themselves about the homebuying process, be aware of what they are signing and ask many questions before signing any contract. However, it does not excuse the actions of the predatory and greedy brokers, loan officers and banks that sold these loans.
The tone of this article is very charged and as a result takes focus away from what the real issue is- people (of ALL ethnicities) that could not truly afford to buy a home were given subprime loans with little or no documentation proving that they would be able to make the payments and meet their regular monthly commitments. All with astronomical balloon payments, interest rates and tripling mortgage payments.