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Black borrowers with down payments of 20 percent or more were denied home mortgages in Massachusetts at higher rates than other borrowers in 2020, according to a new report from the Massachusetts Community & Banking Council.
Massachusetts did see more Black and Latinx homebuyers receive purchase mortgages in 2020 compared to any of the past 30 years, the MCBC said in a statement. But the percentage of loans made to Black and Latinx borrowers remained below their share of the population.
The report, which analyzed 2020 Home Mortgage Disclosure Act data, covers the first year of the pandemic and was prepared for the MCBC by the University of Massachusetts Donahue Institute. The report focused on first-lien mortgages for owner-occupied homes.
“Our analysis shows a homeownership market in Massachusetts, that while serving more homebuyers of color than ever before, is still not closing the wide racial homeownership gap in the Commonwealth,” Carrie Bernstein, research manager and state data center manager at the UMass Donahue Institute, said in the statement.
The report found a record-high number of home purchase mortgages for Black and Latinx households, with 3,900 and 7,155, respectively. Total home purchase mortgage volume was 76,380 loans, the most loans since the MCBC began reporting on mortgage data more than 30 years ago.
Black residents, who make up 6.5 percent of the Massachusetts population, received 5.1 percent of total loans and 3.4 percent of loans, excluding FHA loans. Hispanic and Latinx residents represent 12.6 percent of the state’s population and received 9.4 percent of total loans and 6.6 percent of non-FHA loans.
The higher cost FHA loans went disproportionately to Black and Hispanic borrowers, the MCBC said, with 15.3 percent going to Black borrowers and 26.7 percent to Hispanic borrowers.
Nearly one-third of Massachusetts’ 351 cities and towns – 107 cities and towns – saw no purchase loans for Black homebuyers in 2020, according to the report.
Boston, Springfield, Worcester, Brockton and Taunton accounted for 38 percent of all loans to Black homebuyers in Massachusetts, a decline from five years ago, when these cities accounted for 46 percent of all loans to Black borrowers.
While more Black and Latinx borrowers received home mortgages in 2020, mortgage denial rates for these borrowers were higher compared to white and Asian borrowers. This group of borrowers had relatively modest overall debt and earned above the area median income, the MCBC said.
Among applicants who planned to make down payments of 20 percent or higher, Black borrowers were denied at a 13 percent rate, Hispanic borrowers at 9 percent, Asian borrowers at 6 percent and white borrowers at 5 percent.
The MCBC also found that fewer Black borrowers planned to make a down payment of 20 percent or more. While 47 percent of Asian borrowers and 34 percent of white borrowers had a loan-to-value ratio of 80 percent or less, only 13 percent of Hispanic and Latinx borrowers and 9 percent of Black borrowers met that criteria.
The debt-to-income ratio was the most common reason for denial for all borrowers, the report found. For Black borrowers, the second most common reason for denial was credit history.
For the first time since the MCBC began reporting on mortgage data, mortgage companies originated more than half of all mortgage loans in the state. Mortgage companies originated 54 percent of home mortgages and Massachusetts banks originated 29 percent of mortgages, while out-of-state lenders originated 12 percent, and credit unions originated 5 percent, the MCBC said.
The ten most active lenders in Massachusetts overall included seven mortgage companies, with Guaranteed Rate and Fairway Independent Mortgage Co. as the most active lenders, along with three banks: Leader Bank, Citizens Bank and Salem Five. The top thirty lenders made nearly 60 percent of all home purchase loans, the MCBC said.
“This report highlights the importance of the Community Reinvestment Act, especially now that federal regulators have initiated a review of this critically important law, in encouraging all lenders – banks, credit unions and mortgage companies – to reach underserved borrowers and neighborhoods,” Elliot Schmiedl, co-chair of MCBC’s Mortgage Lending Committee and director of homeownership at the Massachusetts Housing Partnership, said in the statement. “We hope lenders and community organizations will use the report to join the conversation with MCBC on how to better reach this population.”
