| FHA loans make up a disproportionate share of the financing used by African-American and Latino homebuyers, according to a recent report from the Association of Community Organizations for Reform Now (ACORN). 'The Great Divide' is an analysis of racial and economic disparities in home purchase mortgage lending nationally and in sixty metropolitan areas.
The report analyzes data released by the Federal Financial Institutions Examination Council (FFIEC) about the lending activity of more than 7,800 institutions covered by the Home Mortgage Disclosure Act (HMDA). The reporting includes the number and type of loans correlated by the race, gender, income, and census tract of the applicants, and the disposition of those applications, in each MSA where loans are originated.
Acorn says that the rise of credit scoring has made FHA products easier for lenders to use for clients with more complex credit histories. In 2000, government-backed loans accounted for 41% of all home purchase originations to African-Americans and 40% of the purchase loans to Latinos nationally, while they make up just 17% of the purchase loans to whites.
African-Americans received almost a three times greater share of all government-backed mortgages than of conventional ones, and Latinos received almost a two times greater share of government-backed loans. Furthermore, although minorities are rejected more frequently than whites for government-backed loans, the disparity is much less than with conventional loans and the disparity decreased from 1999 to 2000.
In contrast to conventional loans, the disparity between white and minority denials for government loans declined. In 2000, African-American homebuyers were 1.62 times more likely to be denied for a government-backed home purchase loan than whites were. This was down from 1999 when African-Americans were 1.72 times more likely to be denied than whites. In 2000, Latinos were rejected just 1.15 times more often than whites for government-backed loans, a decrease from 1999 when Latinos were rejected 1.34 times more often than whites. |
Acorn also reported the following:
- In 2000, African-Americans received 13% of government-backed loans
- almost three times their share of conventional loans.¨
- Whites received 70.0% conventional loans and 57.7% of government loans
- Government-backed loans accounted for 41% of the purchase loans received by African-Americans and 40% of the purchase loans received by Latinos, as compared to 17% of the purchase loans made to whites.
- African-Americans and Latinos were both 2.4 times more likely than whites to receive a government loan (compared to a conventional loan) when buying a house.
- African-American applicants for government-backed mortgages were denied 1.62 time more often than white applicants, a decrease from 1999 when African-Americans were turned down 1.72 times more often than whites.
- Latino applicants for government-backed loans were just 1.15 times more likely to be denied than whites in 2000, down from 1999 when Latinos were 1.34 times more likely to be turned down.
- In 2000, 13.0% of government loans went to African Americans, almost 3 times their share of conventional loans, and 15.4% went to Latinos, almost 2 times their share of conventional loans.
- Whites received 57.7% of the government-backed loans, but 70% of conventional loans.
- In 2000, lenders made almost 3.3 million conventional purchase loans, compared to less than 1 million government purchase loans.
- In 2000, African-Americans only received 7.4% of all home purchase originations, almost two times less than their share of the population.
- Latinos received 9.1% of all home purchase originations, also below their share of the population.
- In 11 MSAs Latinos received more than a 3.75 times greater share of government loans than of conventional loans.
- In 8 MSAs the African-American denial rate for government-backed loans increased more than 40%.
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