Racial Stratification Among Latinos in the Mortgage Market

2023

Rural Sociology

Inequality in homeownership is a major component of ethno-racial stratification. Previous studies demonstrate large ethnoracial differences in access and outcomes throughout the home buying process at both the individual and neighborhood levels. An underlying assumption in these studies is that neighborhood ethno-racial disparities in lending are similar across neighborhood spatial types. However, mortgage lending disparities are unclear when examining the neighborhood's racial composition across urban, suburban, and rural communities. This paper draws on annual data from the American Housing Survey and the Home Mortgage Disclosure Act (HMDA) from 2018 and 2019 to assess loan outcome disparities by neighborhood type and racial composition. I show that applicant disparities in loan outcomes vary when factoring the neighborhood's spatial type and racial composition. Borrowers seeking a mortgage in predominantly minority rural communities are more likely to be denied a mortgage than borrowers applying across all other neighborhood type and racial composition. The trends for urban communities are similar to suburban communities across adverse loan outcomes. When comparing the community's racial composition and neighborhood type, the observed lending pattern provides evidence of constrained mortgage access in rural areas, especially among minority rural communities.Homeownership is a major component of financial stability and asset growth for most Americans, especially for minorities. Unequal access to homeownership across ethno-racial groups is a significant contributor to asset inequality (Oliver and Shapiro 2006), as minorities are unable to take advantage of the tax incentives that subsidize homeownership and increase wealth accumulation (Prasad 2012; Quinn 2019). In addition to economic benefits, owning a home is associated with positive neighborhood attributes such as lower crime rates, better public schools, and increased social networks (Charles 2003;Massey 2005;Sharkey and Faber 2014;Yinger 1998). Unequal access to homeownership remains for minorities, despite anti-discrimination laws. The homeownership rate in 2020 was about 74 percent for non-Hispanic whites (hereafter "whites"), 60 percent for Asians, and only 50 percent and 45 percent for Hispanics (hereafter "Latinos") and non-Hispanic blacks (hereafter "blacks") (United States Census Bureau 2021).

Section: Methodsmentioning

confidence: 99%

Differential Access in Mortgage Credit: The Role of Neighborhood Spatial and Racial Stratification

2023

Rural Sociology

“…HMDA is also the only public national mortgage dataset that includes the applicant's gender, race, ethnicity, and application neighborhood (Bradford 2002). As a result, HMDA is the most commonly used data source on gender and ethno‐racial disparities in accessing mortgage credit (Cherian 2014; Faber 2013; Loya 2021; Rugh, Albright, and Massey 2015).…”

Section: Methodsmentioning

confidence: 99%

Gender and ethno‐racial disparities in access to mortgage credit

Social Science Quarterly

2023

There is a long history of gender and ethno‐racial stratification in access to homeownership. Previous research highlights unequal treatment of minorities and women in the mortgage market. However, prior studies focus on single loan applicants when assessing the roles of both gender and race and ethnicity in their analysis. Because of this, it is unclear how mortgage lending disparities differ when considering the intersection of gender and race and ethnicity across single and co‐applicants. This paper draws on annual data from the 2018 and 2019 Home Mortgage Disclosure Act (HMDA) to assess gender and ethno‐racial disparities in loan outcomes. I document two diverging trends. On the one hand, single applicant women generally perform similarly or outperform single applicant men in the mortgage market even across ethno‐racial groups. On the other hand, women‐headed co‐applicants are more likely to experience an adverse loan outcome compared to male‐headed co‐applicants. The gender gap is substantially larger for black and Latino co‐applicants than for white co‐applicants. This is particularly true for black women‐ and Latina‐headed co‐applicants when examining mortgage denials. The results for Asian co‐applicants are mixed, as gender disparities differ across mortgage outcomes. Implications for gender and ethno‐racial stratification are discussed.

“…HMDA is also the only national public mortgage data set that contains the applicants’ race, ethnicity, and application neighborhood (Bradford 2002). As such, HMDA is the most commonly used source of data on ethno-racial disparities in the mortgage market (original and refinanced mortgages; Acolin et al 2017; Cherian 2014; Faber 2013; Loya 2021; Loya and Flippen 2020; Quillian, Lee, and Honoré 2020).…”

Section: Methodsmentioning

confidence: 99%

Ethno-Racial Stratification in the Refinanced Mortgage Market

Sociology of Race and Ethnicity

2023

The mortgage industry is a key component of ethno-racial stratification in wealth and homeownership. Previous research demonstrates that unequal treatment of minorities has created inequality in access and exclusion to low-cost mortgage loans in the housing market. While prior studies have documented the disadvantages Black and Latino home seekers face in obtaining a mortgage, these studies have not considered the obstacles that current homeowners face when seeking to refinance their mortgage. This study draws on annual data from the Home Mortgage Disclosure Act (HMDA) from 2018 to 2019 to assess ethno-racial disparities in refinanced mortgage outcomes by loan purpose. I demonstrate that loan rejections and high-cost loans are highest among Black homeowners seeking to refinance their home, especially when trying to make home improvements or cashing-out equity from their home. In general, Asians and Latinos perform in between Whites and Blacks across mortgage outcomes and loan purpose. These trends are particularly true when examining adverse loan outcomes for applicants seeking a cash-out refinance. Implications for ethno-racial stratification and the wealth gap are discussed.