Statistical Analyses of 1997 Mortgage Lending In Metropolitan Statistical Areas
August 24, 1998
Circular No. 11086

To the Chief Executive Officers of State Member Banks in the Second Federal Reserve District:

Our Circular No. 11077, dated July 28, 1998, contained a press release from the Federal Financial Institutions Examination Council (FFIEC) announcing the availability of data on 1997 mortgage lending transactions at individual institutions in metropolitan areas throughout the nation. The following is from an additional press release on this topic by the FFIEC:

The Federal Financial Institutions Examination Council (FFIEC) has announced the availability of data about 1997 mortgage lending activity in metropolitan areas and released analyses of nationwide summary statistics regarding lending patterns. The nationwide summary statistics are attached to this release; the following provides a general overview.

The data reflect lending activity for 7,925 institutions, both depository and non-depository, that are covered by the Home Mortgage Disclosure Act (HMDA) and that reported data to member agencies of the FFIEC--the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Reserve System--and to the Department of Housing and Urban Development.

The 1997 data include 16.4 million reported loans and applications, an increase of about 11 percent from 1996, resulting primarily from increased refinancing activity (table1). The number of home purchase loans extended in 1997 compared with 1996 increased 12 percent for Asians, 4 percent for Blacks and Hispanics, and 2 percent for Whites, while decreasing 1 percent for Native Americans. During the five years from 1993 through 1997, the number of home purchase loans extended has increased 62 percent for Blacks, 58 percent for Hispanics, 29 percent for Asians, 25 percent for Native Americans, and 16 percent for Whites (table 9).

The number of home purchase loans extended to applicants in all income categories increased in 1997 compared with the prior year. The number of such loans extended in 1997 to lower income applicants (applicants having incomes less than 80 percent of the median family incomes for their metropolitan statistical area, or MSA) increased 6 percent over 1996, while the number of such loans extended in 1997 to upper income applicants (applicants having incomes equal to or more than 120 percent of their MSA's median) increased 5 percent over the prior year. During the five years from 1993 through 1997, the numbers of home purchase loans extended to lower income and upper-income applicants increased 38 percent and 27 percent, respectively (table 9).

In 1997, 34 percent of Hispanic applicants and 26 percent of Black applicants for home purchase loans sought government-backed mortgages; the comparable figures for White applicants, Asian applicants, and Native American applicants were 15 percent, 12 percent, and 11 percent, respectively. Twenty-seven percent of lower income applicants for home purchase loans applied for government-backed loans in 1997, compared with 11 percent of upper income applicants (table 2).

Denial rates for conventional (non-government-backed) home purchase loans in 1997 were 53 percent for Black applicants, 52 percent for Native American applicants, 38 percent for Hispanic applicants, 26 percent for White applicants, and 13 percent for Asian applicants (table 5). Except for Asian applicants, each of these rates exceeded the comparable rate for 1996.

The denial rate for conventional loans was 29 percent in 1997. This rate has increased in each of the past several years, reflecting, in part, the increasing share of applications for conventional loans filed by lower income applicants.

In recent years, a growing share of the applications reported under HMDA has been filed with lenders that specialize in manufactured housing and subprime lending (table 3). In 1997, the lenders of these types that report under HMDA denied 56 percent of all applications they received for conventional home purchase loans, compared with 12 percent for other lenders (table 4).

The disclosure statements underlying the statistics presented above and in the attached tables are available for public inspection at central depositories throughout the nation. The disclosures include individual financial institutions' disclosure statements and aggregate data for each MSA. (The location of the central depository for an MSA can be obtained by calling the FFIEC at 202/634-6526 or by visiting the FFIEC Web site. In addition to the disclosures available at central depositories, HMDA data are available from two other sources: at offices of lenders subject to HMDA and directly from the FFIEC in Washington, D.C.

The FFIEC makes HMDA data available in various formats, including paper, magnetic tape, PC diskette, and CD-ROM, and at the FFIEC Web site. Tables showing the nationwide aggregates and key demographic information for MSAs can be obtained in paper form. The data for all individual loans and applications, submitted by the reporting institutions, are available on CD-ROM, magnetic tape, and PC diskette. An order form, with descriptions of the various reports and formats available, is attached to this release.

The HMDA reports contain data about loan originations, loan purchases, and applications that did not result in a loan; and they give information about three characteristics of applicants or borrowers: race or national origin, gender, and annual income. For most loans relating to property located in MSAs, as well as some loans relating to property located outside MSAs, the reports identify the geographic location, usually by census tract.

The HMDA data also include information on loans that are sold, showing the type of purchaser of the loan. Among other things, this information is used by the Department of Housing and Urban Development in assessing the performance of Fannie Mae and Freddie Mac in meeting their legislatively mandated affordable housing goals.

The FFIEC also provides data on mortgage insurance applications. Data from the nation's eight private mortgage insurance (PMI) companies were compiled under the auspices of the Mortgage Insurance Companies of America, and are available at individual PMI companies, at the central depositories in each MSA, and from the FFIEC.

Questions on this matter may be directed, at this Bank, to Janice A. Oser, Examining Officer, Compliance Examinations Department.