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A Chart Can Be Worth a Thousand Words (or at Least 300)

posted by Geoff Smith

Woodstock Institute recently released a report called Paying More for the American Dream V:  The Persistence and Evolution of the Dual Mortgage Market in collaboration with six other research and advocacy organizations from around the country. The report is the fifth in an annual series that looks at systematic inequalities in the housing finance system and their impact on lower-income neighborhoods and communities of color. I pulled data used in this report to create the chart below. To me, this chart, more than perhaps any other data visualization I’ve seen, illustrates the different directions in which America’s white communities and its communities of color are headed.

Refi chart for cs The chart uses data reported under the Home Mortgage Disclosure Act and looks at the change in conventional mortgage refinance originations in the Chicago region between 2008 and 2009 (the most recent year for which data is available). It breaks these changes out by the race and ethnic composition of the census tract in which the loan was originated. The chart shows that in predominantly white communities (those less than 10 percent minority), conventional refinance originations more than doubled between 2008 and 2009. It also shows that in communities of color (those greater than 80 percent minority) conventional refinance originations declined by 41 percent over the same period of time. 

Just from a visual standpoint, my gut reaction when seeing this chart is to think that one type of community is ascending while another type is falling off a cliff. Clearly there are a lot of underlying factors behind the trends illustrated in this chart that I want to disucss in another post, but to me it immediately brings to mind clear questions about the different trajectories of white communities and communities of color post-crisis and about the challenges facing communities of color beyond simple access to mortgage credit.


This isn't all that surprising or earth shattering. On average, minority communities tend to have worse credit and instability of incomes relative to white communities.

Even when controlling for income and credit, there are still many factors that often time result in minorities having issues with getting mortgages (discrimination isn't one of them). Income and credit are only two high level factors that banks look at and don't tell the whole picture.

2008 & 2009 saw the end of subprime lending and that is also when Fannie/Freddie and even FHA started tightening up their own underwriting guidelines effectively cutting off credit to the most marginal of borrowers.

The other issue is that appraisal values fell hardest in minority communities such as the south and far west sides. I recently had a client have a condo on the south side appraise for $38k that he paid $180k for six years ago.

I would really like to know what exactly you propose to fix the systematic inequalities? The problems in these communities are much much deeper than simple access to credit.

Aren't you a little troubled by the internal contradictions in the collaborative reports (I clicked through to several earlier ones)?

On the one hand, the reports claim that "subprime" lenders loaned too much money to people in minority-dominated neighborhoods. On the other hand, the reports claim that today's lenders aren't loaning enough money in such neighborhoods.

Well, what do the authors want? More lending or less?

Note that in virtually every individual case, even of "predatory" loans, the borrowers agreed to make payments which they could not, as it turned out, actually make.

I'm not rejecting the fact that the sales staff of "predatory" lenders, in order to earn commissions by-- effectively-- cheating remote investors in lender's bonds, helped put many thousands of borrowers into loans they couldn't really afford (often by loan-application fraud). I'm not rejecting the fact that many borrowers may have been too cognitively challenged to understand that their ARM monthly payments might go up (or even certainly would go up when teaser rates expired).

However, none of that belies the simple observation that all those borrowers took on debt they couldn't service. Even a perfectly race-blind and objective underwriter must recognize that those people are poorly qualified to borrow more money. Why should lenders loan more money to people who they know-- not by theory but by experience-- are incapable of paying it back?

Denouncing serious underwriting criteria (such as contribution of a substantial down payment) as improper considerations for mortgage lending, when the recent housing bubble was arguably caused by dispensing with such criteria,* appears to be the least respectable kind of racial special pleading!

*read http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_wallison_dissent.pdf

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