CFPB Issue Report to Asians, Americas and Pacific Islander Mortgages | Ballard Spar LLP

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CFPB recently released a report entitled Data Point: Asians of Asian and Pacific Islander in the Mortgage Market… The report briefly examines the differences between subgroups of Asian American and Pacific Islander (AAPI) based on data from the Housing Mortgage Disclosure Act 2020 (HMDA). When issuing the report, the CFPB stated that “[e]Existing studies often portray AAPI borrowers as similar in characteristics to non-Hispanic white borrowers and thus imply that the group is doing well. However, this characterization does not take into account some subgroups of the AAPI, whose characteristics may be similar to black or white Hispanic borrowers and, therefore, may find it difficult to access credit at lower prices. ” The CFPB also says the information in the report “is not intended to be an in-depth or comprehensive analysis, but rather offers an initial look at the heterogeneity of mortgage characteristics in the AAPI community.”

Prior to 2018, the HMDA Data Collection Form for Applicant Demographics was Asian and Hawaiian or Pacific Islander Native. Beginning in 2018, the form was expanded to include (1) “Asian” as well as the subgroups “Asian Indians, Chinese, Filipinos, Japanese, Koreans, Vietnamese, and other Asians” and (2) “Hawaiian Natives or Others the Pacific Islands “, as well as the subgroups” Indigenous people of Hawaii, Guam or Chamorro, Samoa and other inhabitants of the Pacific Islands. ” The candidate can nominate one or more subgroups. For both the “Other Asian” and “Other Pacific Islander” subgroups, there is a free field in which the applicant can complete a specific subgroup. Overall, the report looks at (1) differences in mortgage characteristics by race and ethnicity and by AAPI subgroups, (2) borrower characteristics by race and ethnicity and by AAPI subgroups, and (3) the distribution of mortgage lender types by race and ethnicity and in the AAPI subgroups.

The report includes the following observations:

  • “Using detailed information on race and ethnicity in HMDA data for 2020, [CFPB] found that some AAPI subgroups did better in the mortgage market than others. For example, Chinese and Asian Indian borrowers paid, on average, lower interest rates than non-Hispanic white borrowers. On the other hand, even though they had higher average credit ratings and earnings, and a lower total loan-to-value ratio (CLTV), their bounce rate was higher than non-Hispanic white borrowers. ”
  • “Hawaii or Pacific Islander (HoPI) borrowers had lower income and credit ratings, higher CLTV scores, debt-to-income ratio (DTI), and failure rates than other AAPI subgroups. Moreover, although borrowers from Vietnam, Hawaii, and other Pacific Islanders had higher average credit scores and incomes, and lower median DTIs and CLTVs, than borrowers from blacks and whites Hispanics, their bounce rates were similar to those of blacks and whites. borrowers of Hispanic origin “

The CFPB notes caveats to the findings, including that there may be differences between AAPI applicants in the decision whether to nominate a subgroup, and that broader statistical analysis of all an applicant’s credit characteristics that affect underwriting decisions goes beyond volume of the report.

The report states that:

  • Of the 1.6 million closed and open source applications submitted by AAPI, Asian and HoPI consumers accounted for 96% and 4% of these applications, respectively.
  • AAPI borrowers were far less likely to take home loans than any other racial group, although there are differences between AAPI subgroups.
  • AAPI borrowers are more likely to take conventional loans than any other racial group, although there are differences between Asian borrowers and HoPI borrowers, and between AAPI subgroups.
  • The AAPI home loan average characteristics model, some of which are listed below, are largely determined by Asian borrowers rather than HoPI borrowers.
    • AAPI borrowers had the highest average loan amount, and their properties were less likely to be located in minority or low or middle income (LMI) areas than black and white Hispanic borrowers. However, HoPI borrowers ‘properties are slightly more likely to be located in LMI areas, but less likely to be located in urban areas compared to Asian borrowers’ sites.
    • AAPI borrowers paid, on average, lower interest rates than any other racial group, even though most of their loans were large. However, HoPI borrowers took out mortgage loans with higher interest rates compared to Asian borrowers.
  • On average, the failure rate of AAPI borrowers was higher than that of non-Hispanic white borrowers and lower than that of black or Hispanic white borrowers, although failure rates varied greatly across the AAPI subgroups.
  • AAPI borrowers were more likely to use depository mortgage lenders than black and white Hispanic borrowers, but less likely to use such lenders than non-Hispanic white borrowers. However, HoPI borrowers were less likely to use depository mortgage lenders than Asian borrowers in general.

The report concludes with the following:

“Recently, attention has been drawn to political debate and academic research regarding inequality in home ownership and the associated racial division of wealth. However, much of the discussion has focused on the division between blacks and whites, often overlooking issues in Hispanic or AAPI communities. A better understanding of the differences in characteristics of AAPI mortgages could potentially shed light on why there is a wealth gap in these communities. This report provides only descriptive evidence of the differences between AAPI mortgage borrowers. We leave that to the future to find out why there are such differences. “

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