The Evidence Is In: Mortgage Credit Easing

Mortgage & Real Estate

Mortgage credit is finally getting looser.

Sure, the dollar volume of unfunded mortgages actually went up in 2012, according to Home Mortgage Disclosure Act data. And the volume of unfunded mortgages is staggering! HMDA tallied $1.1 trillion in unfunded mortgages for 2012, up from $1 trillion in 2011.

But, since the volume of funded mortgages also went up, to $2.1 trillion last year from $1.4 trillion in 2011, the percentage of unfunded mortgages actually decreased, to 34% from 40%.

Conclusion: it was easier to get a mortgage last year than the year before.

Now, HMDA numbers are funky. Thats what happens when you have 7,000 lenders typing into a single spreadsheet, metaphorically. The dollar volumes of mortgages registered by HMDA are always higher than other estimates. (The Mortgage Bankers Association estimate for last year is about $1.8 trillion.) There may be double counting, or just uncaught errors. But comparing HMDA numbers to each other year-over-year seems like apples to apples to me.

HMDA is also useful for measuring minority mortgage numbers. Not surprisingly, the funded/unfunded ratios were a little less favorable last year if you were an African American, an Hispanic, an American Indian, or a Native Hawaiian. On the plus side, no minority group showed more unfunded than funded apps. But for African Americans, that ratio was just 52%. For American Indians, it was just 54%. For Hispanics, it was 60%. Whites and Asian-Americans were approved for mortgages at a higher rate than the national average of 64%.

Overall, minorities received about 17% of total mortgage dollars last year. This is well below their percentage of the population, currently above 33%. But again, theres a HMDA asterisk.

Mortgage applicants self-identify themselves to race or ethnicity (HMDA considers Hispanics an ethnicity rather than a race) on the forms. But there is no obligation to do so, and many do not. Last year, $540 billion in mortgages were in the N/A category. Thats 17% of the total not being identified as to race or ethnicity.

It defies belief that all of those N/A mortgage applicants would be minorities. Lets say this category is reflective of their ratio in the population. One-third would come to an additional 6%. At 23%, minorities would still be underfunded.

You could make the point that credit not getting worse is actually a relative positive for minorities, considering the chokehold on mortgage finance since the sector collapse. The minority rate has been about 17% for the past three years.

Taking a look at the individual state funded/unfunded by race or ethnicity figures, California naturally tends to dominate. There is a startling figure here, and that is the ratio for Asian applicants. About $36 billion in mortgages went to Asian Americans last year, and just $7 billion was unfunded. Thats more than 80% of apps funded in this category and is way higher than even the approval rates for whites, which was 60%.

Also noteworthy but slightly less startling is the Native mortgage story in the state. If you were an American Indian, the good news is that $2 billion was extended to Natives in the Golden State last year. Thats more than 25% of the national total of $7.5 billion. And with $1.3 billion in unfunded loans, the success rate was 60%, the same as for whites.

You didnt know there were a lot of Indians in California? Well, there is a lot of everything in California. But the Golden State has more than 90 tribes living on reservations (called rancherias) inside its borders. And it has lots of Native people living in urban areas, especially Los Angeles. And a higher percentage of them got mortgages last year than the national average for Indians.

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