Banks and thrifts in the nations biggest statistical areas tended to reject a higher percentage of minorities mortgage loan applications than did mortgage companies or credit unions, a new analysis of 1993 HMDA data show.
The analysis, performed for American Banker Newsletters by Dallas-based Centrax Services Inc., represents one of the first attempts to make public a breakdown of HMDA figures by lender type. (See chart, page 4.) They show banks were more likely than the others to reject loan applications by blacks and Hispanics, and less likely than thriftsbut still more likely than mortgage companies or credit unionsto turn down loan requests from whites and Asians.
Those relative differences pale, however, against the fact that all four of the lending groups rejected twice as many blacks and Hispanics as they did whites, and tended to be more parsimonious in lending to heavily minority areas than they were in granting credit to low-income districts.
All these statistics were taken from applications to buy, refinance and improve loans in the 25 biggest metropolitan statistical area ranked by total applications. The group accounts for 31% of all the 15.38 million loan applications made across the U.S. If national trends hold true for this subgroup, about half of the 4.77 million loan applications handled within the top 25 were for refinancings, 40% were to buy homes and the rest were for home improvements and multifamily loans.
Differences in credit requirements between refinancings, new loans and improvement loans probably helps skew the data. So do two other facts.
First, the mortgage companies category includes mortgage banking units of commercial banks and thrifts. This means that commercial banks with a tendency to hand relatively easy loan applications to their mortgage units could end up posting commercial bank results that dont look so good.
Second, the various lending groups play a mixed role in the housing industry. Nationwide, mortgage companies handled 53.8% of all refinancing applications last year but only 11.2% of the requests for home improvement loans. In contrast, credit unions handled 2.8% of all refinancings but 10.6% of the home improvement loan applications.
The MSAs that comprise the top 25 are, in order: Los Angeles-Long Beach; Chicago; Washington, D.C.-Md.-Va.; Detroit; Philadelphia-N.J.; Atlanta; Minneapolis-St. Paul; Phoenix; Denver; Houston; Dallas; New York; Riverside-San Bernadino, Calif.; St. Louis, Mo.-Ill.; Seattle; Anaheim-Santa Ana, Calif.; Tampa-St. Petersburg-Clear-water, Fla.; Baltimore; San Diego; Boston; Oakland, Calif.; Miami-Hialeah; Fort Lauderdale, Fla.; Nassau-Sullfolk, N.Y.; and Cincinnati, Ohio-Ky.-Ind.
Sexism doesnt appear to be much of a factorand when it is, men lose. Thrifts rejected 18% of the applications by males and 15% of the applications by women, while for banks the rates were 18% and 17%, respectively, and for mortgage companies it was 15% male, 13% female. Credit unions posted a 13% rejection rate for men and women.
Wealth, on the other hand, mattered quite a bit to most lending groups and not so much to mortgage companies. Banks in the Top 25 MSA rejected 23% of all applications from people earning less than 80% of the median salary in their area. For those making 120% of the average, the rejection rate slid to 11%. But in those same cities, the slide for mortgage companies drops from 16% for the poor to 11% for the rich, and at thrifts it was an 18% no rate for the poor, 14% for the wealthy. Only credit unions echoed banks by rejecting 17% of the poor and only 6% of the wealthy.
The percentage of minorities living in the census tract of the house listed on the loan application appeared to matter less to mortgage companies than to the other lenders. Mortgage companies said no to 9% of the applicants who sought loans for houses in census tracts with fewer than 10% minorities. Meanwhile, in areas with over 80% minority presence, the rejection rate climbed to 21%.