Presentation at MassHousing Prabal Chakrabarti, AVP and Director of Community Development March 3, Any views expressed are not necessarily those of the Federal Reserve Bank of Boston or the Federal Reserve System. Slides prepared by AnaPatricia Munoz.

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4 Source: National Association of Realtors, Median Existing Single-Family House Price; Moody's Economy.com, Median Household Income, as reported by the Joint Center for Housing Studies.

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Source: U.S Census Bureau, CPS/HVS 6

Gap: 44 percentage points 7 Source: U.S Census Bureau, CPS/HVS

8 Source: Loan Data as Reported Under the HMDA and reported by MCBC; U.S. Census Bureau, American Community Survey 2006 − 08 Lending to minorities not proportionate to their share of population

9 Source: Loan Data as Reported Under the HMDA and reported by MCBC Lending to minorities falling since onset of mortgage crisis

10 Source: Loan Data as Reported Under the HMDA and reported by MCBC; U.S. Census Bureau, American Community Survey 2006 − 08 Denial rates

11 Median Household income In 2008 inflation- adjusted dollars Percent Difference relative to white non-Hispanic USMAUSMA White non- Hispanic56,64869,226 Black35,08642, Hispanic41,63032,

12 Source: Loan Data as Reported Under the HMDA and reported by MCBC

A study by the Center for Responsible Lending (2006) shows that for most part of subprime home loans, African-American and Latino borrowers are at greater risk of receiving high-rate loans than white borrower, even after controlling for risk factors (including LTV and credit scores)  For several types of loan products, African-Americans and Latino borrowers were more than 30% more likely to receive a higher- rate fixed rate loans than white borrowers.  Possible explanations: Disparate loan pricing-’yield-spread” ( 59% of subprime originations in 2005 were broker-originated) Market segmentation: higher-rate lenders targeting African-American and Latino borrowers (in % of African-American borrowers received their loan from a broker versus 38% of white borrowers). 13

Minority population is growing in Massachusetts 14

15  The census projects that Hispanics’ share of total population in the U.S. will grow from 16% in 2010 to 19% in 2020 and to 28% in 2050 (under constant immigration).  Even under the low immigration assumptions, minorities will fuel 73 percent of household growth in 2010–20, with Hispanics leading the way at 36 percent. Population Growth in Massachusetts by Race/Ethnicity (percent change) TotalHispanic or Latino White Non- Hispanic Black Non- Hispanic 1990 to 2006–

16 Average age of first time homebuyer: 33 years old Minorities are younger Source: American Community Survey,

According to a Fannie Mae survey (2003):  Only 44% of Spanish Hispanic (Hispanics that both speak and read Spanish most frequently at home) have accurate information a about the home-buying process.  Only 18% of Spanish Hispanic identify themselves as having above average understanding of the home-buying process.  23% of Spanish Hispanic have not bought a home because the home-buying process seems too complicated. 17

 A Chicago Fed study showed that with financial counseling : Lower delinquency and default rates Some borrowers choose less risky products Lower market activity; no effect on house prices  A UNC study* looked at a CRA special lending program that had flexible underwriting criteria. Controlling for similar borrower risk characteristics, borrowers and lenders achieved: Across ~50,000 loans, the average borrower had income of 62 percent of AMI, one- third had credit scores below 660, half were LTV>97, and 40 percent were minority. One-fourth the default rate of subprime loans across the 2004 vintage Less than one third the default rate of a subprime loan across the 2006 vintage  An SF Fed study* also found lower default rates among loans issued by CRA regulated lenders in LMI neighborhoods For details, see Revisiting the CRA: The Future of the Community Reinvestment Act a Community Development publication at 18