Latinos are underrepresented in Mortgage Loans Applications

Latinos became the largest ethnic minority group in the US in mid-2000s. They currently make up nearly the 17% percent of the US population and contribute up to $2.13 TRILLION to the economy. However, it would be hard finding evidence of these numbers by looking at mortgage applications.

In the state of California, Latinos are highly underrepresented in the mortgage market. In fact, Latinos represent nearly half of the population of Los Angeles, but only account for 18% of applications. In Fresno, they only account for a quarter of loan applications despite making up half of the population.

There are many reasons behind these low numbers and one of them is the high prices. California over the past decade has been known its rising prices and its housing crisis and Latinos, who usually earn less that the national average, cannot afford homes in the state.

To compensate for this, Latinos usually opt for FHA loans which require lower down payments but are pricier.  However, according to Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals, Latinos tend to seek FHA loans because they are usually inexperienced first-home buyers and the FHA serve as the path with least resistance.

Yet, the truth is that Whites get their loans approved at a higher rate than people of color. A recent study from the Center for Investigative Reporting revealed that African-Americas and Latinos got their mortgages denied at a higher rate than Whites across 61 metro areas. These includes Philadelphia, Detroit, Atlanta, and Washington. In communities such as Chico and Salinas, Latinos were denied loans 2.5 and 1.7 times respectively.

What is more troubling is that whites are starting to take advantage of laws that were designed to help minorities and low-income households.

Community Reinvestment Act of 1977, for instance, was originally meant to correct redlining policies that kept banks away from neighborhoods with higher concentration of immigrants and African-Americans. Yet, as gentrification takes over White’s move to those neighborhoods receive the benefits of the 1977 act. What is more, since the law is enforced geographically, banks can get away with denying banks loans to colored people and still pass their CRA evaluations.

Some point out that banks are not redlining minorities, but rather their applications are denied based on their credit scores and income.

However, there are cases in which minorities are left without a loan, while at the same time whites with lower credit scores and unstable income are approved.  Such is the case with Rachelle Faroul, a computer programmer with enough money to cover for her down payments, who got rejected based on her unstable income; but when her low-earning half white half-Japanese girlfriend applied, she was approved.

While millions have been able to purchase their own homes since the economy recovered from the 2008 Housing Crisis, masked discrimination, redlining and high prices have kept Latinos from having a fair representation in the real estate market.

Sources

https://www.pbs.org/newshour/show/struggle-for-black-and-latino-mortgage-applicants-suggests-modern-day-redlining

http://latinodonorcollaborative.org/latino-gdp-report/

https://www.csmonitor.com/USA/2018/0216/Black-and-Latino-mortgage-borrowers-still-face-subtle-discrimination-at-the-bank

https://www.mercurynews.com/2018/02/15/california-latinos-make-up-small-fraction-of-mortgage-market/