Mortgage lending to minority groups declined 7 percent in 2006, according to an analysis released at a recent conference on mortgage lending to emerging markets and diversity.
The exception was among African Americans, which showed an increase of 0.6 percent over 2005.
The report on lending to minorities in 2007 was compiled and released by Compliance Technologies and Genworth Financial. Compliance Technologies is a Washington D.C.-based emerging mortgage markets and lending-compliance consultant. Genworth Financial is an insurance holding company with 15 million customers and operations in 27 countries.
The study found that the greatest decline in minority home-buying was among Asian buyers -- down 21 percent. Home buying by Hispanics declined 5.2 percent in 2006 from 2005.
"The momentum we’ve been seeing in minority homebuying unfortunately came to a halt in 2006," said Maurice Jourdain-Earl, managing director of Compliance Technologies. "The level of subprime lending to minorities that the report shows is troubling.
Nearly four out of every 10 mortgages extended to "all minorities" in 2006 were subprime loans -- more than double the rate for white borrowers, according to the report -- 39 percent compared with 18 percent. Among minorities, subprime lending was most prevalent with African-American borrowers with 48 percent of all 2006 loans, followed by 42 percent of Hispanics and 17 percent of Asians.
By comparison, 18 percent of white borrowers received subprime loans in 2006.
Using data from the 2006 Home Mortgage Disclosure Act (HMDA), the report on lending to minorities analyzed the change in minority home purchase loans between 2005 and 2006 nationally, and the percentage of new loans that were subprime.
It provided an analysis of "all-minority" home loans and a more in-depth look at activity among African-American, Hispanic, and Asian borrowers specifically. It also included 2005 - 2006 home-buying information for white borrowers for comparison.
"This new report indicates that, for a variety of possible reasons, many minorities who took out a new mortgage last year are financing their home with a subprime loan," said Kevin Schneider, president of Genworth Financial’s U.S. mortgage insurance business.
Mortgage insurance can play a part because it allows low down payment borrowers to avoid risky combo loans thereby reducing their risk significantly," Schneider said.
According to the report, all minority groups and whites experienced a decline in home buying last year compared with 2005, except for African-Americans with an increase of 0.6 percent.
Nearly four out of every 10, or 39.1 percent of mortgage loans made to minorities in 2006 were subprime. This was more than double the rate for white borrowers -- 18 percent.
Utah, Texas, New Mexico, Oklahoma and Louisiana top the list of states that experienced growth in home-buying by members of minority groups 2006 over 2005.
According to the report, home buying among Hispanics declined by five percent from 2005 to 2006, but Hispanics did have more mortgages than any other minority group last year with 692,014 loans. African Americans accounted for 448,082 mortgage loans last year.
North Carolina reported the strongest positive growth in Hispanic home buying from 2005 to 2006. Lending to Hispanics in that state was 21.6 percent higher in 2006 than in 2005. North Carolina was followed, in order, by South Carolina, Utah, North Dakota and Louisiana in loans originated for Hispanic home buyers.
The highest rates of subprime loans made to Hispanics in 2006 were found in Rhode Island with 52.3 percent, Massachusetts, with 49.2 percent, Florida at 48.7 percent, Arizona, with 48.4 percent and California with 47.1 percent of loans falling into the subprime category.
African-American home buying increased in 26 states and territories from 2005 to 2006. This compares with five states showing increases in home buying among whites.
In 12 states, more than one-half of all mortgage loans to African Americans in 2006 fell into the subprime category.
Michigan had the highest percentage of subprime loans to African-Americans in 2006 with 70.7 percent, followed by Wisconsin with 61.6 percent, Missouri, with 59.4 percent, Illinois at 58.8 percent and Indiana with 57.4 percent.
The report showed that 17 percent of all mortgage loans to Asians in 2006 were subprime, less than half the national subprime rate for all borrowers with 39 percent and lower than the national subprime rate among whites at 18 percent.
States that experienced the steepest declines in Asian home buying between 2005 and 2006 were Virginia (-44.8 percent), Arizona (-41 percent), North Dakota (-39.4 percent), Maryland (-35.2 percent) and California (-33.3 percent).
Only 10 states saw Asian home-buying grow in 2006, the report said.
