America must equalize access to homeownership

00_CharleneCrowell01Owning a home has long been an important part of the American Dream. A home is more than just where families come at the end of the day. It is also where children are raised, memories are created, and how historically most American families built wealth.

Discriminatory government policies of the past prevented many Blacks and Latinos from building wealth via homeownership. Older consumers may still recall the difficulties of obtaining a mortgage loan before laws were enacted to require equal credit access.

Despite these laws, discriminatory lending practices during the recent era of subprime loans erased many of the financial gains that Black and Brown families made since the enactment of the Community Reinvestment Act. Instead, these consumers were targeted for predatory, unsustainable loans.

A key measure of the foreclosure crisis is that these families lost $1 trillion in wealth. Even families whose homes were preserved, but located nearby multiple foreclosures, also lost wealth. Many of these families still remain underwater on their homes – owing more than they are now worth.

Crisis out west
New research by the Center for Responsible Lending (CRL) highlights how post-housing crisis lending trends perpetuate racial wealth gaps and housing segregation.

CRL’s analysis of first-lien, owner-occupied home purchase mortgages in California made from 2012-2014 reveal a lack of access to conventional mortgages for many Black and Brown consumers – even when these consumers had higher incomes greater than the median areas where they live.

“These post-crisis mortgage lending trends in California help to inform our continuing national discussion of homeownership and the importance of responsible mortgage credit,” commented Sarah Wolff, report author and a CRL senior researcher.

“The communities that lack access to mortgages post-crisis are the very same communities that were disproportionately affected by foreclosures and lost wealth during the housing crisis.”

Report summary
CRL’s analysis of Home Mortgage Disclosure Act (HMDA) data in California found that:
•More than two-thirds of homebuyers in every race or ethnic group had middle or high incomes for their area;
•Among Black consumers receiving mortgages, 79 percent had middle or high incomes relative to other households in their areas. Similarly, among Latino borrowers, 66 percent had these same income levels.
•Few conventional mortgages, the most affordable and sustainable loans, were made to African-American and Latino consumers; and
•The dearth of access to conventional mortgage loans shifted Black and Latino homebuyers to higher-cost, government-insured mortgage loans such as VA and FHA. Most of the homes purchased were also in majority minority census tracts.

“Recent law [Dodd-Frank Wall Street Reform Act], has made today’s loans much safer for borrowers than those of the past,” states the report. “Most importantly, the law’s Ability-to-Repay requirement ensures that lenders confirm that a potential borrower can afford the loan.

“However, restricted access to credit in the post-crisis period has resulted in the very same families and communities which have been historically disadvantaged finding it difficult to access today’s responsible mortgages.”

Consistent trends
While regional differences are apparent, statewide trends were also evident in four large California counties: Alameda, Fresno, Los Angeles and Solano. For example, Black consumers who represent 14 percent of Solano’s population, received only 8 percent of that county’s loans and 72 percent of those were government-insured loans.

Similar figures for Blacks were consistent in the other three counties studied, with African-American borrowers in both Los Angeles and Alameda Counties receiving 4 percent of respective county loans. In Fresno County, Blacks received only 2 percent of that county’s mortgage loans.

Although California’s largest lenders made the greatest number of loans to Blacks and Latinos, these populations, they represented a much smaller share of overall originations for the state’s largest lenders. By contrast, some smaller lenders, though generating fewer loan totals, appeared to focus on serving Latino borrowers in particular.

Concluded the report, “If the trends found here continue, few families will become homeowners, with implications for overall national wealth and for the health of the real estate market.”

Charlene Crowell is the Communications Manager for State Policy & Outreach with the Center for Responsible Lending. Contact her at


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