Lending Report

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Following the “Roadmap for Increasing Black Homeownership” this report seeks to explore the status of the recommendation to “expand lending to Black and low-income homeowners that is fair and non-predatory" two years after HOME’s initial report. To do this HOME analyzed home mortgage lending data reported by lending institutions through the Home Mortgage Disclosure Act (HMDA) over a six-year study period in Hamilton County, Ohio. Between 2018 and 2023, the housing market changed dramatically through COVID, rising and falling interest rates, and a tightening of housing supply. This volatile period affected national and local housing trends, including mortgage lending.

Full Lending Report

Key Findings

Black households are underrepresented in the mortgage lending process.

Black households represent 25% of the population in Hamilton County. Black borrowers represent only 15% of borrowers applying for mortgage loans, while white borrowers represent 79% of mortgage applications. Considering Black households represent 25% of the population, Black borrowers are severely underrepresented in mortgage lending applications and originations. These disparities are attributed to systemic barriers in banking services, including a history of redlining and discrimination, and higher rates of reported difficulty with the banking process among Black applicants.

Black borrowers are denied at a higher rate than white borrowers, regardless of income.

Black applicants are more than twice as likely to be denied as white applicants. Over the six-year period, 12% of all mortgage applications were denied. However, 21% of Black applications were denied and 10% of white applications were denied, meaning there is an 11-percentage point disparity. When controlling for only upper-income applicants, upper-income Black applicants are more than 2.8 times more likely to be denied compared to upper-income white applicants. Upper-income Black applicants are denied 18% compared to upper-income white borrowers who are denied 6% of the time.

Neighborhoods where Black households live have much less access to mortgage lending.

Over half of loans that are made in Black communities go to white applicants.

Only 15% of all mortgage loans went to census tracts with over 50% people of color, despite those census tracts representing 33% of census tracts in Hamilton County. Of lending to census tracts of color, over half (55%) of those borrowers were white borrowers. These lending practices are having an impact on many communities that have historically been majority Black communities that are now seeing increases in white population and gentrification.

Lending to Communities of Color

Figure 6 Loan Originations by Race (2).png

Mortgage lending is not evenly distributed throughout the County. Map 1 demonstrates loan applications per household and Map 2 demonstrates loan originations per households. On both maps, the blue represents non-white population and crosshatch represents low- and moderate-income census tracts. The dots represent loan applications or originations per 100 households. Larger dots illustrate more loans per 100 households, and smaller dots fewer loans. Areas with darker blue, representing communities of color, have smaller dots meaning there is less lending relative to household population, compared to whiter and wealthier communities in Hamilton County.

Create Special Purpose Credit Programs

Lenders can develop Special Purpose Credit Programs (SPCPs), which are targeted lending products or programs that provide benefits to an ‘economically disadvantaged class of people’. A SPCP is designed to overcome historical segregation and discrimination. Regulation B of the Equal Credit Opportunity Act explains the specific provisions of an allowable SPCP.

Considering the findings in this report, the Cincinnati region could benefit from SPCPs designed to target Black homebuyers in order to overcome historical redlining and current gaps and disparities in homeownership. These programs should be focused on Black borrowers and not simply Black neighborhoods in order to protect against further gentrification in Black neighborhoods.

Many lenders have recently created SPCPs, including some of the top lenders included in this report. Lenders can create SPCPs, but so can Community Development Financial Institutions (CDFIs) and local governments that administrate home loan products and programs. Learn more about SPCPs online here: https://spcptoolkit.com

Expand Loan Products

Lenders must look at their product offerings to identify opportunities to expand credit to qualified borrowers. Features that can help expand credit access include the following:

Home purchase loan products with lower downpayment requirements, loan products with lower mortgage amounts, and the use of alternative credit scoring models.
Purchase and renovation loans that have affordable and accessible terms and rates can help new homebuyers rehab homes.
Home improvement loan products can help preserve homeownership and keep homes in good quality.

Support Down Payment Assistance Programs

As housing values have increased dramatically, the cash necessary for a downpayment has also increased. Down Payment Assistance (DPA) Programs can assist new homebuyers, but the assistance must be accessible and easy to use. With such high demand and competition for new homes, buyers using DPA programs that have restrictive and burdensome terms are losing out to offers with cash. Lenders can offer in house downpayment assistance programs as part of CRA-eligible products or as part of Special Purpose Credit Programs. The City of Cincinnati’s American Dream Downpayment Initiative (ADDI) [39] provides significant resources to eligible homebuyers, but the restrictions limit the ease of use and effectiveness of this for many borrowers.

There are other programs available providing downpayment assistance that can continue providing support and ensuring more borrowers benefit from these programs. Find more downpayment resources here: https://www.lisc.org/greater cincinnati/what-we-do/housing-our-future/housing-resources/

Support Housing Counseling Agencies

Housing counseling programs are critical at assisting new homebuyers through the complicated process of buying a home. They provide education about buying a home and applying for a mortgage, and they provide intense support with helping a borrower qualify for a loan and get to closing. Providing funding for HUD-certified housing counseling agencies is necessary to continue this kind of support for homebuyers. In Hamilton County, the HUD-certified Housing Counseling Agencies are Working In Neighborhoods, and The Home Ownership Center of Greater Cincinnati, Inc.

Enforce Fair Lending Laws

If you or someone you know feels like you have been discriminated against because of your race or any other protected class in the home lending market, call HOME. HOME will continue to examine fair lending data and conduct investigations to identify instances of discrimination in the home buying market. HOME is prepared to file fair housing complaints against lending institutions with the appropriate enforcement agency, including U.S. Department of Housing and Urban Development, the Department of Justice, and in court.

Policy Recommendations

Top 15 Lenders Applications and Originations to Black Borrowers Lender

In lending to Black borrowers, Freedom Mortgage and First Financial are closest to parity on percent of applications and originations with the demographics of the community. Black households represent approximately 25% of the population in Hamilton County. There are 5 lenders with percentages above the aggregate, and 10 lenders below the aggregate lending percentages. There are 6 lenders that have extremely low levels of lending to Black borrowers, less than half of the aggregate percentages. Considering the market overall only originates 12% of loans to Black borrowers, this indicates serious concerns about lenders failing to serve Black borrowers in Hamilton County.