Freddie Mac’s Equality in Housing mission is to expand homeownership opportunities and to access affordable housing for underrepresented borrowers, especially communities of color.
During the Great Recession and the subprime lending crisis, Black and Hispanic homeowners were disproportionately affected by foreclosures and the tighter lending standards. New HMDA-reported mortgage originations to Black and Hispanic borrowers declined from 25% of originations in 2006 to just 12% by 2009. As of 2018, the White–Black and White–Hispanic mortgage ownership gaps stood at roughly 17 and 16 percentage points, respectively. At the same time, the White–Hispanic and White–Black homeownership rate gaps persisted. This study uses uniquely constructed credit bureau data to answer two questions: How do consumers’ credit profiles determine their decision to enter mortgage ownership? What explains the racial/ethnic gap in rates of transition to obtaining new mortgages?
Our research reveals several interesting findings. First, using a logistic regression model, we find that some of the important determinants of the decision to enter mortgage ownership are age, income growth, marital status, getting a FICO score, the individual’s demand for a mortgage, and local unemployment rates. Consumers with limited credit histories are less likely to transition to acquiring new mortgages. Other factors, such as student loan debt, auto debt, gender, number of children, and educational attainment, play less important roles.
Second, we find that…Read this article The Role of Credit Attributes in Explaining the Homeownership Gap Between Whites and Minorities Since the Financial Crisis, as Freddie Mac investigates significant barriers to minority mortgage ownership and explains the unequal housing recovery across minority groups.
