Fed: Lending Way Down in 2008, But Racial Disparities Persist
Each fall the Federal Reserve releases a report on mortgage lending during the previous year, based on the data that almost all mortgage lenders are required to report to the government under the Home Mortgage Disclosure Act (HMDA). Last week’s detailed report is available here, and an accompanying press release is here.
Given the state of the economy in general and the housing market in particular, it’s not surprising that the data show a big drop both in overall mortgage lending and in high-cost (sub-prime) lending. The total number of mortgage loans fell from 14.0 million in 2006, to 10.4 million in 2007, and then to 7.2 million in 2008. High-cost loans fell even more sharply; after reaching a high of 29% of all loans in 2006, they dropped to 18% of the total in 2007 and to just 12% of the total in 2008.
Expressed differently, the total number of high-cost loans fell from about 4.0 million in 2006, to 1.9 million in 2007, and to about 0.9 million in 2008. Of course, this drop in high-cost lending reflects the implosion of the subprime lending industry rather than any crackdown by the regulators.
These are dramatic changes, but one thing has remained depressingly constant – huge racial/ethnic disparities in mortgage lending:
The drop in overall mortgage lending fell particularly heavily on blacks and Latinos. Black borrowers received just 6.3% of all home-purchase loans in 2008, down from 8.7% in 2006; the Latino share of all home-purchase loans was 8.5% in 2008, down from 12.1% in 2006.
Blacks and Latinos were about two and one-times more likely than whites to receive high-cost loans in 2008. 17.1% of all home-purchase loans to blacks, and 15.4% of all home-purchase loans to Latinos, were high-cost loans, compared to just 6.5% of all home-purchase loans to whites.
Black applicants for home-purchase loans in 2008 were denied 36.1% of the time, and Latinos were denied 31.1% of the time, compared to a 13.6% denial rate for white applicants.
At the same time that it releases its report, the Fed makes the raw HMDA data publicly available to researchers who are interested in looking in greater depth at particular lenders and/or particular geographic areas. Keep a look out for reports based on this data during the months ahead.