Home lending data reveals discrepancies in Latino mortgage lending
WASHINGTON, DC— Latino borrowers paid substantially higher closing costs and interest rates for home purchase loans compared to non-Hispanic White borrowers, according to a new report from the National Community Reinvestment Coalition (NCRC) and UnidosUS.
The report revealed dramatic differences in the costs and lending patterns for different subgroups of Hispanic borrowers, such as Cuban, Mexican and Puerto Rican borrowers. It also found that most Latino borrowers get their mortgages from non-bank mortgage companies and not from banks.
The report was created using newly available data that lenders are required to report under the Home Mortgage Disclosure Act (HMDA). In 2019, for the first time, the data included information on specific sub-groups of Latinos, providing a clearer picture of Hispanics’ diverse home lending needs. The 2019 data, made available to the public earlier this year, will give policymakers more insight into the range of experiences of Latino borrowers in the mortgage market and help them develop a blueprint for finding new homeownership opportunities for Latinos.
This new data comes on the heels of a presidential election in which Latinos were noted for their immense impact and their wide-ranging voting preferences, especially as it related to their location and sub-category of origin. This same diversity is also notable in the experience of each of these groups when they enter the mortgage market to buy or refinance their home. The data shows Latinos played an outsized role in growing the mortgage market, specifically, leading in the volume of home purchase loan applications.
As this report notes, the new data enables the incoming Biden Administration to adopt a federal housing policy that reflects the diverse home-lending needs among Latinos, and recognizes the diversity within the broader community, while making home financing more affordable.
Key findings from the report include:
- Patterns of home lending to Latinos varied by geography and among Hispanics who identified as Cuban, Puerto Rican and Mexican. While one in three Hispanic borrowers overall relied on government loans programs, over half (52%) of Puerto Rican borrowers received a government-insured loan. This highlights the differences in credit needs among different Hispanic groups.
- Latinos continued to face barriers and disparate treatment in the mortgage market. Hispanics paid a significant premium to borrow money. Hispanic homebuyers paid 43% more to close on a home purchase loan than non-Hispanic White applicants and 30% more in interest. This amounted to $1.5 billion in additional closing costs for Hispanic homebuyers in 2019 compared with non-Hispanic Whites.
- Closing costs and interest rates were substantially higher for Hispanic borrowers than for non-Hispanic White borrowers.
- Hispanic borrowers relied much more on government back lending programs such as VA and FHA than non-Hispanic White borrowers. Specific Hispanic communities, such as Puerto Ricans, were especially dependent on these loans for buying and refinancing their homes.
- Home ownership is the primary way that families in America build and maintain wealth. This holds true for Latinos, who are among the fastest growing segments of the U.S. population. But not all Latino borrowers share the same experience in the mortgage market, and their experiences vary based on where they lived in the U.S. and whether they identify as Cuban, Puerto Rican, or Mexican.
“The results of this study paint a very different picture than that of previous data, with some Hispanic borrowers enjoying lower interest rates, closing costs and loan origination rates than others,” said Jesse Van Tol, CEO of NCRC. “This valuable data gives us a new window into the Hispanic experience in the housing market and the discrimination that exists between different Hispanic communities.”
“Owning a home is the bedrock of the American dream. And that holds even more true for the Latino community,” said Eric Rodriguez, Senior Vice President, Policy and Advocacy for UnidosUS. “Latinos continue to share a strong desire to own a home, despite the challenges of saving for a down payment, high housing costs, and bias in the credit system. This report highlights the premium Latinos pay to borrow money, which is a lasting effect of decades-long discrimination in housing. It also sheds light on important home lending patterns, giving lenders and policymakers the clues they need to unlock homeownership opportunities for Latinos. The incoming Biden administration must adopt new policies that make affordable home financing available to all qualified homebuyers—including Latinos—to have the chance to own a home and build wealth for future generations.”
Click here to read the full report.