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Racial Stratification Among Latinos in the Mortgage Market

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Abstract

Studies of the mortgage industry’s impact on racial stratification have long focused on racial disparities found between white and black homeowners. Ample research demonstrates that unequal access and treatment between white and black home seekers has created major differences in the type of loan products they are offered in the marketplace. While numerous studies also document disadvantaged Latino homebuyers, studies have yet to examine racial variation within the Latino population. This paper draws on annual data from the Home Mortgage Disclosure Act (HMDA) from 2010 to 2017 to assess variation in racial disparities among Latinos in loan outcomes and compares them to Non-Latino whites, blacks, Asians, and Others. I show that loan rejections and high cost originations are highest among black Latinos and lowest among white and Asian Latinos. Other Latinos perform somewhere in the middle. These trends are particularly true when examining mortgage denials. When comparing Latino racial groups to Non-Latinos, the observed lending patterns provide evidence of a tri-racial hierarchy in the mortgage market.

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Notes

  1. A modified multivariate analysis was conducted using 2018 and 2019 HMDA data set and it produced consistent results as presented in the final analysis.

  2. Several types of stratified random samples were examined. The substantive results remained consistent across different stratified random samples.

  3. The stratified samples that were tested included sampling based on equal and unequal proportions across racial groups. The results produced using these samples were consistent with the results shown.

  4. About 60% of denied mortgages were related to credit issues or insufficient collateral/ down payment. About 30% of mortgage denials were due to other reasons, not related to credit. Because social desirability bias is likely to shape the reported reasons for loan denial, these should be taken as a lower-bound estimate of racial disparities.

  5. The analysis was also conducted by separating Native Americans and Pacific Islanders and I found no substantial differences in the multivariate results.

  6. Additionally, I focus my attention on differences among Latino racial groups because interpreting the summary statistics for “All” is limited due to the use of a stratified random sample.

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Authors and Affiliations

  1. Department of Urban Planning, Luskin School of Public Affairs, University of California at Los Angeles, 3250 School of Public Affairs Building, Los Angeles, CA, 90095, USA

    José Loya

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Appendix

Appendix

See Tables 2, 3, 4.

Table 2 Odds ratios from multinomial multi-level hierarchical linear model of loan outcomes from 2010 to 2017 stratified sample: high cost origination (Ref = Conventional Origination)
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Table 3 Odds ratios from multinomial multi-level hierarchical linear model of loan outcomes from 2010 to 2017 stratified sample: bad credit denial (Ref = Conventional Origination)
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Table 4 Odds ratios from multinomial multi-level hierarchical linear model of loan outcomes from 2010 to 2017 stratified sample: other reason denial (Ref = Conventional Origination)
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Loya, J. Racial Stratification Among Latinos in the Mortgage Market. Race Soc Probl 14, 39–52 (2022). https://doi.org/10.1007/s12552-021-09326-3

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