- By Mark Fogarty
While the numbers of mortgages extended to Native Americans jumped in 2020 as home refinancings boomed during a year of low interest rates, their share of total loans went down, Home Mortgage Disclosure Act data show.
According to an analysis by Jason Richardson, Joshua Devine, and Jad Edlebi for the National Community Reinvestment Coalition, 56,864 mortgages of all types (for home purchases, refis, home improvements and home equity loans) were extended to Native Americans for 2020, way up from the 37,917 loans made in 2019.
However, the Native American share of mortgages went down, from 0.5 percent of the national total in 2019 to 0.4 percent in 2020.
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Native Hawaiians saw a huge jump to about 30,000 in 2020 from 20,000 in 2019. However, their share of the nationwide total remained the same for both years, at 0.2 percent, according to NCRC.
In both cases, just about all the increase came in refinancings. American Indians (who are added in with Alaska Natives for HMDA purposes) doubled from 14,186 to 30,766 refis. Native Hawaiians (HMDA also puts other Indigenous Pacific Islanders such as Guamanians and Samoans in with them) also doubled their refinancings, to 19,484.
However, the NCRC believes that the number of mortgage applicants who did not reveal their racial identity tends to distort the numbers.
“Since 2018, the number of loan originations in HMDA that lack this critical information has grown from 10.8% to 13.6% of all originations. The absence of data is more acute for refinance loans, where 15.2% of loans made to owner occupied homes lack demographic data on race and ethnicity,” Richardson, Devine and Edlebi wrote in the report.
“This gap in HMDA likely masks a substantial imbalance in the race and ethnicity of borrowers that initiate their loans online,” according to the authors.
Taken together, the two Native groups saw 87,136 mortgages in 2020, up from 58,028 the prior year, an increase of 50 percent, according to the NCRC analysis.
The dollar volume of mortgages made to Natives in 2020 also showed the boom in refis. An analysis of the HMDA data made by LendingPatterns.com, a product of McLean, Va.-based ComplianceTech, showed that of $7.2 billion in mortgages to American Indians and Alaska Natives in 2020, $4 billion of that was in refinancings.
For Native Hawaiians, $2.4 billion of the $3.3 billion total went to refis, according to the LendingPatterns data.
In additional good news, both Native groups saw an increase in approvals of their applications by lenders.
Loan approvals for American Indian/Alaska Natives increased from 53 percent to 57 percent in 2020, while Native Hawaiians/Pacific Islanders saw an even bigger move from 55 percent to 60 percent for the year, according to the NCRC analysis.
Denial rates also declined for both groups, from 23 percent to 17 percent for Indians and from 22 percent to 14 percent for Native Hawaiians.
Credit history was the biggest category of reasons for Indian declinations at 31 percent, according to responding lenders, followed closely by high debt-to-income ratios at 30 percent. For Native Hawaiians the order was reversed, with 33 percent declined for DTI ratios and 25 percent for credit histories.
Quicken Mortgages of Michigan was the top lender to American Indians and Alaska Natives for 2020, according to LendingPatterns. It made $530 million in mortgages in the AIAN category, taking a 7.3 percent of the market share.
Second was Freedom Mortgage Corp. of Florida, at $360 million, for about a 5 percent market share. Taking the bronze was MidAmerica Mortgage of Addison, Texas with $340 million. Mid America has its own designated Native subsidiary, 1st Tribal Lending.
On the Native Hawaiian/ Pacific Islander side, United Wholesale Mortgage of Michigan dominated, with a 13 percent share, at $440 million. Quicken was second at $260 million, and Freedom third at $190 million.
The Consumer Financial Protection Bureau also has done an analysis of the 2020 HMDA data, focusing on how Native Hawaiian and Pacific Islander results can differ negatively from the broader “Asian and Pacific Islander” (AAPI) classification which includes Americans of Japanese, Chinese, Korean or Indian heritage.
According to the CFPB: “Hawaiian or Pacific Islander (HoPI) borrowers had lower income and credit scores, higher combined loan to value ratios, debt-to-income ratios (DTI), and denial rates than the other AAPI subgroups. Furthermore, although Vietnamese, Native Hawaiian, and Other Pacific Islander borrowers had higher average credit scores and incomes, and lower median DTIs and CLTVs than Black and Hispanic White borrowers, their denial rates were similar to those for Black and Hispanic White borrowers.”
The CFPB said there is considerable diversity in the AAPI subgroups, including the rate of homeownership. But it also noted the trend toward fewer home applicants indicating their race on the applications, making the dataset smaller than it would be otherwise.
There is also diversity inside the Native Hawaiian/Pacific Islander category. “Among the HoPI subgroups, Native Hawaiians (22 percent) were almost twice as likely to take cash-out refinance loans than Samoans (12 percent),” according to CFPB.
Looking just at the home purchase market, excluding refinancings, there were 3,545 mortgages made to HoPIs in 2020, the agency said, at an average loan amount of $324,000, which would be about $1.16 billion in finance. Average loan costs for these borrowers were $7,187 and interest rates averaged 3.26 percent.
“HoPI borrowers took out mortgages with higher interest rates compared to Asian borrowers. For example, the interest rate of Guamanian borrowers, who paid the lowest average interest rate among HoPI borrowers, was 3.17 percent. The average interest rates for Samoan (3.25 percent) and Other Pacific Islander borrowers (3.27 percent) were higher than those of all AAPI borrowers (3.11 percent) but lower than those for Black and Hispanic White borrowers (3.33 percent).
The agency pointed out that “the disparities in interest rates and total loan costs can have real implications on the costs of financing a home.”
“They can result in barriers to accessing affordable credit, and make it difficult to accumulate wealth through real estate, which is one of the largest contributors to household wealth,” according to the CFPB report. “Lastly, the properties of HoPI borrowers were slightly more likely to be located in LMI (low and moderate income) neighborhoods, but less likely to be located in metro areas compared to those of Asian borrowers.”