2019 State of Housing in Black America

Homeownership Rates
• The homeownership rate for Black households stood
at 40.6 percent in the second quarter of 2019—a full
percentage point lower than 2018’s second-quarter
rate of 41.6 percentage points. The current homeownership rate for Blacks is currently below the 1968 level
of 40.9 percent at the time of the passage of the Fair
Housing Act.
• Homeownership for non-Hispanic Whites stands
at 73.1 percent, down from its high of 76 percent
in 2004.
• Blacks have experienced the most substantial loss of
homeownership since 2004, declining more than 8.5
percentage points, or 17 percent, as compared to the
less than 4 percent decline for non-Hispanic Whites.
In other words, Blacks have lost more than four times
the share of homeownership as non-Hispanic Whites
since 2004.
• Half of all Blacks born between 1956 and 1965 were
homeowners by the age of 50. Blacks born between
1966 and 1975 have a homeownership rate of just
above 40 percent and are thus unlikely to achieve a 50
percent homeownership rate by their 50th birthdays.
Black millennials, if current trends continue, may fail
to achieve a homeownership rate of 40 percent by the
age of 50.
• The gap in homeownership rates between Blacks
and non-Hispanic Whites is larger now than it was
in 1934, the year of the enactment of FHA (Federal
Housing Administration) and the start of modern
housing finance system.
Note: Unless otherwise stated, the majority of data below
draws on findings from 2017 Home Mortgage Loan Data
(HMDA). HMDA is the most comprehensive and publicly
available, federal home finance database. The 2017 HMDA
was the most currently available at the time of this writing.
Because the year 2004 was the peak year of homeownership
for Black homeownership, it is frequently used as a benchmark
for comparisons of 2017market performance.
Loan Applications
• Steady gains have been made in loan applications
from Blacks since 2010, although in 2017 there were
only four-fifths as many applications as there were in
2004 (458,354 applications in 2004 versus 361,457
applications in 2017).
• The most recent share of all loan applications from
Blacks remain below the 2004 level of applications
from Blacks—7 percent in 2004 compared to 6 percent in 2017. This current level has held steady since
2015, yet it is still a full 30 percent lower than the
peak loan application rate of 9 percent in 2006.
Executive Summary
NAREB :: 2019 State of Housing in Black America
• While Black applications have increased overall
by 20 percent from 2016 to 2017, the number of
Black applicants for Federal Housing Administration (FHA) loans rose by only 9 percent since 2016
levels, compared to a 20 percent growth from 2016
to 2015.
• Blacks also experienced a 40 percent increase for conventional loan applications from 2016 to 2017 versus
28 percent from 2015 to 2016.
• About 17 percent of successful Black applicants in
2017 received high-cost loans, up from the 16 percent
in 2016.
• In 2017, conventional applications by Blacks were
64 percent lower than their 2004 level, while FHA
applications were 158 percent higher compared
to 2004.
• In 2017, 40 percent of Black applicants had incomes
at or below 80 percent of the local Area Median Income (AMI), which is still unchanged from 2016.
• In contrast, 27 percent of 2017 non-Hispanic White
applicants fell below 80 percent of the AMI. This is
down slightly from 2016.
• While both shares rose roughly unchanged from
2016, 47 percent of Non-Hispanic White applicants
had high incomes (i.e., greater than 120 percent of the
AMI), but only 30 percent of Black applicants fell into
this income bracket.
Loan Originations
• Originations to Blacks are about 10 percent below
their 2004 level (261,743 loan originations in 2004
versus 236,419 originations in 2017).
• Loan originations to Blacks in 2017 were up by nearly
20 percent, which is consistent with the gain from the
previous 2015 to 2016 period.
• FHA originations to Blacks increased 8 percent from
2016 to 2017, compared to an 18 percent growth
experienced from 2015 to 2016.
• Conventional loan originations to Blacks were up by
40 percent from 2016 to 2017 (compared to 26 percent from 2015 to 2016).
• In 2017, originations were 56 percent below their
2004 levels, while FHA originations were 142 percent
higher compared to 2004.
• Despite an increase in conventional loans originated
to Blacks, the share of Blacks to receive high-cost
loans increased to 17 percent in 2017 compared to 16
percent in 2016.
• Black borrowers continued to receive high-cost
loans at a higher rate. 17 percent of Black borrowers
received high-cost loans compared with 7 percent of
non-Hispanic White borrowers.
Loan Denial Rates by Race and Ethnicity
• For Black applicants, overall denial rates for home
purchase loans were double those of non-Hispanic
White applicants—18 percent versus 9 percent, unchanged from 2016.
• The Black denial rate for 2017 conventional loans was
19 percent, down one 1 percent from 2016, and for
nonconventional loans, 18 percent, unchanged from
the prior year.
NAREB :: 2019 State of Housing in Black America
• The Black denial rate for conventional loans is down
significantly from its high of 36 percent (versus 19
percent) at the height of the foreclosure crisis in 2008.
• Debt-to-income ratio was the most common reason
for denial reported for Black applicants—at 31 percent compared to 20 percent for non-Hispanic White
• Credit history was the second most prevalent reason
for denials among both Black applicants (25 percent)
and non-Hispanic White applicants (20 percent).
• Denials based on debt-to-income ratios tend to
decrease for Blacks as income increases, a tendency
repeated in conventional and nonconventional shares.
• Credit history-based denials for Blacks increase as incomes rise, while remaining relatively flat for non-Hispanic Whites.
Loan Failure Rates by Race and Ethnicity
• Black applicants experienced an overall Loan Origination Failure Rate of 35 percent, compared to a
non-Hispanic White applicant rate of 24 percent, with
each rate up 1 percentage point from 2016.
• The majority, 7 percentage points, of this 11-percentage point difference is due to denials, but an additional 4-percentage point difference is attributable to
applications withdrawn or closed.
• For Blacks, one to two loans were successful for every
application that failed. For non-Hispanic Whites, 2.5 to
3.5 loans were approved for every failed application.
Loan and Lender Channels by Race and Ethnicity
• 66 percent of Black applicants applied for a loan at
a mortgage company, compared with 53 percent of
non-Hispanic Whites. Non-Hispanic White applicants
relied more heavily on banks, with 43 percent seeking
loans from those institutions versus 30 percent for
Black applicants, a 4-percentage point increase for
both groups from 2016.
Applications by Lender Type, Applicant Income,
and Race and Ethnicity
• Across all income groups, Blacks and non-Hispanic
Whites applied to independent mortgage companies at roughly the same rates as in 2016, although
high-income Black applicants to independent mortgage companies dropped by 4 percentage points.
• Except for Black applicants at the 50-80 percent AMI
level, all income categories of both races increased
their applications to banks, savings institutions, and
credit unions by 2 to 6 percentage points over 2016
levels after falling the previous year by 3 to 4 percentage points.
• Blacks experienced a 40 percent increase in applications to banks, savings institutions, or credit unions
(compared to a 29 percent increase by non-Hispanic Whites). The increase in Black applications
was spread across all income levels, with the largest
increase (23 percent) occurring in the 50-80 percent
of AMI category.
• Banks, savings institutions, and credit unions experienced a gap of 13 percentage points in originations to
Black applicants (63 percent) relative to non-Hispanic
Whites applicants (76 percent) that persisted across
all income levels.
NAREB :: 2019 State of Housing in Black America
• Independent mortgage companies exhibited an
origination rate gap of 11 percentage points in
loans to Blacks (66 percent) and non-Hispanic
Whites (77 percent).
• Independent mortgage companies had a lower denial
rate than banks, savings institutions, and credit
unions (13 versus 19 percent, respectively).
• Non-Hispanic White applicants fared better at both
lender types, experiencing denial rates of 7 percent
(independent mortgage companies) and 9 percent
(banks, savings institutions, and credit unions).
Loan Type, Geographic Patterns and Race
• Across lender types, 2017 data clearly show that most
of both conventional and FHA-insured loans going to
non-Hispanic White applicants are concentrated in
census tracts with the smallest percentage (25 percent
or less) of Black population, a pattern unchanged
from 2016.
• For tracks with more than 50 percent Black population, the loan origination disparity for applicants with
incomes over 120 percent AMI is reversed, with successful originations to 57 percent of Black applicants
versus 39 percent for non-Hispanic Whites, a gap
which widened by 6 percentage points since 2016.
• In 2017, 29 percent of loans originated to Black applicants financed properties located in low- and moderate-income neighborhoods—an increase of 5 percentage points from 2016, compared to only 13 percent of
non-Hispanic White borrowers.
• 49 percent of 2017 Black borrowers obtained loans
for homes in majority-minority neighborhoods (up 3
percentage points from 2016), compared to only 10
percent of non-Hispanic White borrowers.
• Denial rates for Black applicants are also higher at
16 percent in majority-minority neighborhoods
compared to a non-Hispanic White denial rate of 10
percent in the same neighborhoods.
Cities with Largest Black Populations and High
Levels of Segregation
• Segregation and racial isolation remain high in the
nation’s 10 cities with the largest Black populations.
All these cities have Index of Dissimilarity measures of
.60 or higher, ranging from a low of .60 in Detroit to a
high of .82 in Chicago. A measure of .60 is considered
highly segregated.
Mortgage Lending to Single Black Female
• In 2017, 39 percent of Black mortgage applicants
consisted of single women without a co-applicant.
Male-female co-applicants represent the smallest segment of the Black applicant pool (20 percent).
• In contrast, single women without a co-applicant
represent only 21 percent of all non-Hispanic White
applicants, with the remaining non-Hispanic White
applicant pool comprised of male-female co-applicants
(41 percent) and single male applicants (34 percent).
• In 2017, 40 percent of applications coming from
single Black female applicants were for conventional loans (compared to 68 percent for non-Hispanic
White women), and 49 percent of applications from
Black women were for FHA loans (compared to 24
percent for non-Hispanic White women).
• Among Black and non-Hispanic White applicants,
male-female applicants have higher origination rates
than single applicants. The percentage of originated
loans among Black male-female co-applicants is 68
percent versus 78 percent among their non-Hispanic
White counterparts.
• In 2017, 18 percent of applications submitted by
single Black female applicants were denied, compared
with 9 percent of applications submitted by single
non-Hispanic White female applicants.
• The loan origination failure rate is also higher among
single Black female applicants than among their
non-Hispanic White counterparts.
NAREB :: 2019 State of Housing in Black America
Black Millennial Homeownership
• Households headed by individuals in the Millennials’
age cohort (21 to 36 years of age) in all racial/ethnic
groups have experienced a decline in homeownership
since the financial crisis, with the Black homeownership rate consistently lower than that of other groups.
• In 2017, Black Millennials had a homeownership
rate of 16 percent compared with 46 percent among
non-Hispanic Whites.
• Higher unemployment and lower labor force participation rates for Black Millennials along with lower
levels of educational attainment and lower median
household incomes are contributing to limited homeownership opportunities for that population.
Mortgage Credit Availability
• The Urban Institute estimates that mortgage credit
availability increased in the first quarter of 2019 to its
highest level since 2013.
• Offsetting that positive news is the proposed termination of the Qualified Mortgage Patch, which allows
certain loans that exceed a borrower’s debt-to-income
ratio (DTI) to exceed 43 percent and still be treated as
a Qualified Mortgage.
• The outcome of that question is particularly important to Black households since DTI is the already the
number one reason for loan application denials among
Black mortgage applicants.
• Inside Mortgage Finance, estimates that 30 percent of
loans packaged last year by the GSEs were to borrowers exceeded the 43 percent DTI threshold.
• According to the Urban Institute, Blacks were nearly
30 percent more likely to be patch borrowers, with a
DTI over 43 percent.
Fannie Mae and Freddie Mac Pricing
• For all loan products combined, the average single-family guarantee fee in 2017 remained unchanged
from last year’s fee of 56 basis points. The upfront
portion of the guarantee fee, based on the credit risk
attributes (e.g., loan purpose, loan-to-value ratio,
and credit score), fell 1 basis point to 15 basis points.
The ongoing portion of the guarantee fee, based on
the product type (fixed-rate or ARM, and loan term),
increased 1 basis point to 41 basis points.
• A larger share of purchase (versus refinances) in 2017
loans and a growing focus on pilot programs for
first-time homebuyers and affordable housing led to a
slight increase in the share of loans with higher loanto-value (LTV) ratios and lower credit scores.
• In 2017, the Enterprises began using FHFA’s Conservatorship Capital Framework (CCF) to calculate the
cost of holding capital. The overall expected profitability of the loan acquisitions was nearly unchanged
and in-line with the targeted level.
• According to the FHFA, “the Enterprises generated
over $24 billion in combined comprehensive income,”
or profit in 2018. As a result, The Urban Institute’s
Housing Finance Policy Center’s latest Housing
Credit Availability Index found that “Significant space
remains to safely expand the credit box. If the current default risk was doubled across all channels, risk
would still be well within the pre-crisis standard of
12.5 percent from 2001 to 2003 for the whole mortgage market.”
NAREB :: 2019 State of Housing in Black America
• The 2018 State of Housing in Black America presented
a compelling analysis of current GSE G-fees by Ted
Tozer, former President of Ginnie Mae, arguing that the
current fees charged by the GSEs equates to a default
probability of about 24 percent for a 95 percent LTV
loan, a default rate higher than the worst performing
loans held by the GSEs during the Great Recession and
improbable for any loans accepted today by the GSEs.
Credit Scoring and Related Risk Assessment
• FHFA issued a final rule on August 13, 2019 regarding
its decisions on the use of updating the credit scores
used by the GSEs. In a major shift, the final rule removed an earlier provision that would have prevented
VantageScore from being considered, but still requires
FHFA to consider if potential conflicts of interest could
affect competition among credit scoring products.
• Based on analysis of the final rule’s timeframes for approving a new credit scoring model and GSE adoption
and implementation, Ben Lane of HousingWire suggests “it will be four more years until the GSEs can use
a different credit scoring model.
• Delaying the use of improved credit score models
from now until 2023 continues the blatant insensitivity (and potential adverse impact discrimination)
by the FHFA toward Black households by insisting
on the use of an outdated credit scoring model that
have been criticized by its own manufacturer as being
inferior to more sophisticated scoring tools.
The Connection Between Jobs, Earnings, and
the Homeownership Gap
• In 2017, only 38 percent of Black families compared
to 68 percent of non-Hispanic White households,
earned enough income to afford the median priced
home of $226,800, even assuming they had a 22 percent downpayment.
• Because most Black households can put less than 10
percent toward downpayment, the share of Black
households who can afford the median priced home
is less than 30 percent due to the resulting higher
monthly mortgage payment needed to compensate for
the reduction in downpayment
• The bottom two-fifths of wealthy households in the
U.S., disproportionately populated by Black households, account for just over 15 percent of owner-occupied housing expenditures.
• Conversely, the richest 20 percent of U.S. households account for as much owner-occupied housing
expenditures as the three middle-income quintiles
combined (lower middle income, middle-income, and
upper middle income). This means that high-wealth
mostly non-Black households define the market (particularly its cost) for housing.
• Rising inequality is being driven by a falling share
of national income going to labor with a larger and
growing share flowing to interest, corporate profits
and rents, sources of income that rarely benefit hourly
labor or Black workers.
• Success of Black parents does not translate into the
income gains for Black children in a manner consistent for children of non-Hispanic White parents. This
reality means that the historic and current income
inequality between Blacks and non-Hispanic Whites
will continue to increase into the foreseeable future.
• Except for Blacks with a college degree, all other Black
workers, including those with an associate’s degree,
have lower unemployment rates than non-Hispanic
White high school drop


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