According to data collected by the Federal Financial Institutions Examination Council (FFIEC) under the Home Mortgage Disclosure Act (HMDA) 1995 was a very impressive year for home lending to Blacks and Hispanics. Mortgage loans to black buyers jumped by 10% over 1994 levels and loans to Hispanic borrowers jumped by 4.1 %, despite a drop in loans made overall. This follows on the heels of even more dramatic increases in 1994 and 1993. This encouraging data has been much heralded and suggests that minority borrowers are finally finding it somewhat less difficult to secure home loans from banks. The accolades and celebrations surrounding this information are well-deserved, but have rarely touched on the behind-the-scenes reasons for these successes. Concomitantly they have tended to gloss over the real problems continuing to face many minority home buyers. This study is an attempt to look behind the numbers, to provide some insight into the mechanisms that are providing such large increases in minority home ownership. As the attached charts show in detail, AHC's Loan Counseling Program has produced significant percentages of the loans made to Blacks and Hispanics in 1995 by its lending partners and thus underscores the importance of community lending agreements in recent improvements in lending to minorities. Given the fact that mortgages to Black and Hispanics increased in 1995 while fewer overall loans were made we view AHC's success as a ringing endorsement of the potential for pre-purchase loan counseling in conjunction with community lending agreements to increase home ownership rates in traditionally underserved communities.

There is still a long way to go to realize equity in the mortgage market. The same HMDA data which reveals dramatic growth in lending to Blacks and Hispanics also continues to show that Black applicants for loans are rejected twice as often as white applicants, and Hispanic applicants 50% more often. Despite the recent increases, home ownership rates among minority families remain much lower than those for non-minorities, one of the reasons why such large increases are possible in the first place. The abandoned houses and empty storefronts that are the continuing legacy of credit deprivation are evident in many neighborhoods.

For that progress which has been made we must not ignore it's essential source: the difficult battles fought and won, with the help of the Community Reinvestment Act, by community after community to draw attention to and change long-standing industry practices which exclude minority borrowers. Indeed, many of these communities have been able to institutionalize these changes through community lending agreements between banks and community groups.

This strategy for increasing home ownership in minority communities paid big dividends in 1995. ACORN Housing Corporation is the largest national practitioner of this strategy and, as this study shows, is able to fashion a model that works in a variety of geographic regions with widely disparate local market conditions and a variety of lending partners.

In Bridgeport, for instance, a small market dominated by a few large banks, First Fidelity, which merged with First Union last year, held an overall market share of 4.29% while commanding an impressive 20.12% of the Black originations and 12.01% of the Hispanic. In a market where 153 lenders made at least one conventional home purchase loan last year, this makes First Fidelity 1st in the Black market and 3rd in the Hispanic. 35% or 37 out of the 103 loans made by First Fidelity were clients referred by AHC. Chase Manhattan Mortgage Corp., which had nearly 6% of the overall Bridgeport market, controlled approximately 4% of both Black and Hispanic originations, making it 6th and 5th in the market respectively. AHC provided nearly 54% of their originations to Blacks and Hispanics. And finally, Shawmut, now a part of Fleet Financial, which had a 1995 market share of 7.27% overall and was the 2nd and 1st largest lender to Black and Hispanics with market shares of 17.49% and 32.86%, received fully 71% of their originations from AHC.

AHC is also able to provide solid production figures in larger, more fragmented markets like Houston which had 320 lenders make at least one conventional home purchase loan. AHC's largest partners in the U.S.'s 4th largest city are NationsBanc Mortgage, a subsidiary of NationsBank, NA, and Texas Commerce Bank. Both banks were large players in the Black and Hispanic communities here in 1995. NationsBanc had 3.9% of the market for originations to Black borrowers and 3.64% of that for Hispanics and ranked 6th and 8th in those markets, respectively. AHC accounted for 30 of NationsBanc's 287 originations to Blacks and Hispanics or just over 10%. Texas Commerce's market share stood at an impressive 7.96% and 6.88% for Blacks and Hispanics respectively making it the number one lender in both markets for 1995. AHC provided 147 of the 556 originations Texas Commerce made to Black and Hispanic borrowers, or a substantial 26%.

In Washington, DC, which saw 385 lenders make at least one conventional home purchase loan in 1995, AHC also has a very productive relationship with NationsBanc Mortgage, one of the larger players in this market as well as in the nation. In DC, their market shares in the Black and Hispanic community are 2.81% and 2.55% making it the 7th largest lender in both markets. Of the 171 loans NationsBanc made to Blacks and Hispanics in 1995, 78 of them, or fully 45%, were counseled by AHC.

But perhaps the clearest example of the kind of impact that AHC has on Black and Hispanic home ownership rates is in Dallas. There, again working with NationsBanc Mortgage and Texas Commerce Bank, AHC has been able to produce truly impressive numbers. NationsBanc holds 4.99% of the market for originations to Black borrowers and 3.94% for that to Hispanics, placing it 3rd in the Black market and 5th in the Hispanic. Much of this is due directly to AHC which provided 73.56% or 128 out of 174 of the clients who got those loans. AHC's impact was even greater for Texas Commerce. AHC provided this bank, which had 3.8% of the Black market for originations giving it a ranking of 7th out of the 355 lenders who originated at least one conventional home purchase loan in 1995 and 1.57% of the Hispanic, making it 12th in that market, with 97 of their 102 originations to Blacks and Hispanics. This works out to an astounding 96%!

The increased loans to minority borrowers in these cities would be erased without AHC's proven model for marrying the capital and resources of lending institutions with potential borrowers previously overlooked or excluded from the mortgage market. The AHC lending agreements which have yielded the large numbers of loans detailed in this study would not exist were it not for the Community Reinvestment Act (CRA). The opportunity which this law provides for community members to comment on the lending performance of financial institutions is the only leverage they have to bring credit into traditionally underserved areas. Although enforcement of CRA by the federal banking agencies has in general been very lax, the public comment period provided by the law is crucial. All of our experience argues that if banks did not have to be concerned about community comment and the CRA when they submit applications for mergers and acquisitions, they would not enter into these agreements. Without these agreements, we know that many financial institutions would not have the capacity to reach communities left distant and often suspicious of banks through years of malign neglect, nor would they have the ability to adjust their responses to the changing economic conditions of communities they usually know little about.

AHC's activities in the seven cities in this study produced 1045 new homeowners in 1995, a rate of 2.9 first-time homebuyers every day. Clearly this is a model that can produce results and every effort should be made to support the processes that brought it about so that the American Dream of home ownership can be made available to every family willing to seize it.

Table of Contents | Appendix A: Methodology