Since 1995, Economics Prof. Jim Campen has been mapping trends in mortgage lending to low-income and minority borrowers in Boston. In December, he released his latest findings in "Changing Patterns V: Mortgage Lending to Traditionally Underserved Borrowers and Neighborhoods in Greater Boston, 1990-1997."
So how are aspiring minority and low-income home-owners faring?
"What's new is that mortgage lending to minorities and low-income
people actually fell in 1997," says Campen. The most underserved
group remains Hispanics. After six years of modest growth, the
percentage of loans to Hispanics dropped to 5.9% in 1997, after
rising from 5.1% of all Boston home purchase loans in 1990 to 7.2% in
1996. For African Americans, the percentages fell for the third year
in a row, to 14.7% after a high of 20.8% in 1994. Hispanic households
accounted for 8.1%, and African American households accounted for
20.6% of all Boston households in 1990, according to 1990 U.S. Census
figures.
This year, Campen for the first time extended his analysis to 27
communities surrounding Boston, and found that in these communities
as well the percentage of loans that went to Hispanics and African
Americans fell in 1997 (Asian Americans, in Boston and surrounding
communities, received slightly more than their proportionate share of
all loans).
The Boston area has been experiencing a booming housing market - -
low interest rates make it an attractive time to buy - - but
escalating housing costs hinder many who would like to own,
especially for the first time. "The single most important reason for
these numbers is that Hispanics and African Americans have lower
incomes, and housing in the Boston area is more and more
expensive,"says Campen. "So a big issue is affordability."
Campen's report also analyzes the performances of three major types
of lenders, including large banks, smaller banks and credit unions,
and mortgage companies. Boston's large banks - - Fleet, BankBoston,
Citizens, and Boston Safe Deposit - - had by far the best record of
lending to minority and low-income borrowers, but their share of all
loans fell from 35% to 25%. "Meanwhile, the mortgage companies, who
do a much worse job of lending to traditionally underserved
borrowers, for the first time made more than half of all mortgage
loans in the city," says Campen.
"Denial rates are also important," says Campen, who says that the
picture is brighter here, where denials of loan applications for
minorities and low-income applicants increased slightly in 1997, but
remain low in relation both to the levels here in 1990 and to
nationwide denial rates today.
For local and historical context, the impetus for Campen's research
on this topic can be traced back to several reports in the late 1980s
issued by federal, state and local agencies revealing substantial
racial disparities in Boston's home mortgage lending market. In 1990,
leaders of the statewide banking industry responded to a year-long
campaign by community advocates by making a commitment to increase
mortgage lending to underserved borrowers, especially in minority and
low-income communities.
In 1995, Campen was commissioned by the Massachusetts Community and
Banking Council to look at how minorities and low-income loan
applicants had fared in light of that commitment. A report has ensued
annually. In addition, the Gastón Institute commissioned
Campen to expand on the finding that Hispanics were the most
underserved minority in the City. His report, Trailing the Pack:
Mortage Lending in Sixteen Massachusetts Cities, 1992-1996, was
published in February, 1998.
After delving into this issue for years, Campen has developed three
recommendations for reducing lending disparities for minority and
low-income borrowers. First, expand support for "targeted mortgage
programs" designed to make homeowner- ship affordable to low-income
residents, such as the Soft Second Mortgage Program of the
Massachusetts Affordable Housing Alliance. Second, ensure that fair
lending laws are enforced. Third, expand the Federal Community
Reinvestment Act, "to cover mortgage companies as well as banks,"
says Campen, who expects to continue this research in future years.