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Current Editorial
November 2, 2009
By Mark Fogarty
Losing Out
Home Mortgage Disclosure Act figures for 2008 show that minorities were big losers in the market contraction last year.
Lenders made $342 billion in mortgages to minorities last year, out of a total of some $2 trillion. That’s just 17% of the total, down from 20% in 2007 and 22.6% in 2006.
With 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.
Doubtless the vaporizing of the subprime mortgage market, which targeted minorities, explains much of the downturn. And some of that targeting was abusive lending, which isn’t helpful in the long run.
The merger of Countrywide Home Loans, Calabasas, Calif., and Bank of America, Charlotte, N.C., may have had some impact as well, since Countrywide for years has been the leader in loans to minorities. Still, the Countrywide lending operation has been integrated into Bank of America, so it will be interesting to see if its minority orientation will be retained.
According to the HMDA numbers, lenders made $130 billion in mortgages to Hispanics last year, $100 billion to Asian Americans, $96 billion to African Americans, $9 billion to Native Hawaiians and $8.6 billion to Native Americans last year.
In dollar terms, mortgages to minorities decreased by 45%, from $614 billion in 2007 to $340 billion last year.
African Americans registered a very sharp drop in mortgages last year, from $170 billion in 2007 to $96 billion, a more than 40% drop in dollar terms.
And though not a huge drop in absolute terms, mortgages to Native people (American Indians, Alaska Natives, Native Hawaiians and Pacific Islanders) have fallen by two-thirds over the past two years.
Countrywide last year lost its longtime position as the top lender to minorities, although a pro-forma merger with Bank of America’s totals would restore it to the top spot.
But JPMorgan Chase took over the top spot last year, with about $53 billion. Countrywide had $43.4 billion, with Wells Fargo coming in third at $41.7 billion. (Wells has multiple reporting units for HMDA; this number combines its bank and finance company lending.) Bank of America had $18 billion in minority lending last year, so with Countrywide added in the combined total would be more than $60 billion.
Countrywide was the biggest lender to African Americans last year, at $13.5 billion, and Native people as well, $1.2 billion to Indians and Alaska Natives, and $1.2 billion to Native Hawaiians and Pacific Islanders.
Chase led the other two categories, with $15.5 billion in mortgages to Asian Americans and $20 billion to Hispanics (the government classifies Hispanics as an “ethnicity” rather than a race).
A reorganizing mortgage market would do well to reverse this precipitous slide. Minorities and immigrants will produce a lot of profitable mortgages over the next generation. Should lenders loan money to unqualified people as they did during the subprime boom? Of course not.
But some underserved people are perfectly qualified for mortgages right now, and these are the people who should be sought out. Enhanced technology will allow lenders to find these people and to accurately quantify what increased level of risk, if any, they represent.
And, there is a second cohort that could be made ready for mortgages through credit repair and homebuyer counseling. This is an intensive and tedious task, but one the industry should embark on to prime the pump for new originations.
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