Nearly Four in 10 Mortgages to Minorities Were Subprime in 2006
New 2007 Report on Minority Lending Reveals Homebuying Declines Among All Minority Groups except African-Americans
Mortgage lending to minorities was down seven percent in 2006, according to a new analysis released today at the 3rd Annual Mortgage Lending Industry Emerging Markets and Diversity Conference outside Washington, D.C. The only exception was among African Americans, which showed an increase of 0.6 percent over the prior year.
The 2007 Annual Minority Lending Report, compiled and released by Compliance Technologies and Genworth Financial, found that the greatest decline in minority homebuying was among Asian buyers -- down 21 percent. Hispanic homebuying declined 5.2 percent.
"The momentum we've been seeing in minority homebuying unfortunately came to a halt in 2006," stated Maurice Jourdain-Earl, Managing Director of Compliance Technologies. "The level of subprime lending to minorities that the report shows is troubling, which is something we will examine closely at our Mortgage Lending Diversity Conference this week."
Nearly four out of every 10 mortgages extended to "all minorities" in 2006 were subprime loans -- more than double the rate for white borrowers, according to today's report (39 percent compared to 18 percent). Among minorities, subprime lending was most prevalent with African-American borrowers (48 percent of all 2006 loans) followed by 42 percent of Hispanics and 17 percent of Asians. By comparison, 18 percent of white borrowers received subprime loans in 2006.
Using newly released 2006 Home Mortgage Disclosure Act (HMDA) data, the report analyzes the change in minority home purchase loans between 2005 and 2006 nationally, and the percentage of new loans that were subprime. It provides an analysis of "all minority" home loans and a more in-depth look at activity among African-American, Hispanic, and Asian borrowers specifically. It also includes 2005 - 2006 homebuying information for white borrowers for comparison.
"This new report indicates that, for a variety of possible reasons, many minorities who took out a new mortgage last year are financing their home with a subprime loan," said Kevin Schneider, president of Genworth Financial's U.S. mortgage insurance business. "This meeting will explore ways to increase minority homebuying with an emphasis on safe, secure solutions. Mortgage insurance can play a part because it allows low down payment borrowers to avoid risky combo loans thereby reducing their risk significantly."
Genworth Financial is a leader in the mortgage insurance industry, which has seen new policies increase over 40 percent so far in 2007.
Topics to be addressed at this year's conference include assessing the damage from the mortgage meltdown, making diversity a core business value; reducing the minority homeownership gap; and ways in which state and local governments are breaking through minority homeownership barriers. For more information about the conference, visit http://www.mortgageindustrydiversity.com/.
Below is a snapshot for each minority category from the report. The full analysis is available upon request.
Highlights of the report for all minorities include:
All minority groups and whites experienced a decline in homebuying last year compared to 2005 except African-Americans (+0.6 percent). Nearly 4 out of every 10 (39.1 percent) mortgage loans made to minorities in 2006 were subprime. This was more than double the rate for white borrowers (18 percent). Utah, Texas, New Mexico, Oklahoma and Louisiana top the list of states that experienced minority homebuying growth from 2005 to 2006.
Highlights of the report for Hispanics include:
Nationally, homebuying among Hispanics declined by five percent from 2005 to 2006, but Hispanics did outpace any other minority group last year with 692,014 loans (followed by African Americans with 448,082). North Carolina reported the strongest positive growth in Hispanic homebuying from 2005 to 2006 (up 21.6 percent), followed by South Carolina, Utah, North Dakota and Louisiana. The highest rates of subprime loans to Hispanics in 2006 were found in Rhode Island (52.3 percent), Massachusetts (49.2 percent), Florida (48.7 percent), Arizona (48.4 percent) and California (47.1 percent).
Highlights of the report for African Americans include:
African-American homebuying increased in 26 states and territories from 2005 to 2006. This compares to five states showing increases in homebuying among whites. In 12 states, more than one half of all mortgage loans to African Americans in 2006 were subprime. Michigan had the highest percentage of subprime loans to African-Americans in 2006 (70.7 percent), followed by Wisconsin (61.6 percent), Missouri (59.4 percent), Illinois (58.8 percent) and Indiana (57.4 percent).
Highlights of the report for Asians include:
Seventeen percent of all mortgage loans to Asians in 2006 were subprime, less than half the national subprime rate for all borrowers (39 percent) and lower than the national subprime rate among whites (18 percent). States experiencing the steepest 2005-2006 declines in Asian homebuying were Virginia (-44.8 percent), Arizona (-41 percent), North Dakota (-39.4 percent), Maryland (-35.2 percent) and California (-33.3 percent). Only 10 states saw Asian homebuying growth in 2006.
About Compliance Technologies
Compliance Technologies is a Washington D.C.-based emerging mortgage markets and lending compliance consulting firm. LendingPatterns.com is a trade name of ComplianceTech.
About Genworth Financial
Genworth Financial is a leading insurance holding company, serving the lifestyle protection, retirement income, investment and mortgage insurance needs of more than 15 million customers, and has operations in 27 countries. For more information, visit http://www.genworth.com/.