1. Presentation at MassHousing Prabal Chakrabarti, AVP and Director of Community Development March 3, 2010 1 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. 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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6. Source: U.S Census Bureau, CPS/HVS 6

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

8. 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. 9 Source: Loan Data as Reported Under the HMDA and reported by MCBC Lending to minorities falling since onset of mortgage crisis

10. 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. 11 Median Household income In 2008 inflation- adjusted dollars Percent Difference relative to white non-Hispanic USMAUSMA White non- Hispanic56,64869,226 Black35,08642,09538.139.2 Hispanic41,63032,03726.553.7

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

13. 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 2001 64 % of African-American borrowers received their loan from a broker versus 38% of white borrowers). 13

14. Minority population is growing in Massachusetts 14

15. 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 2006–0810.787.3-3.333.2

16. 16 Average age of first time homebuyer: 33 years old Minorities are younger Source: American Community Survey, 2006-08

17. 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

18.  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 www.bos.frb.org 18