Mortgages, Data, and Disclosure: Current Research on Homeownership in New Latino Destinations

Posted November 21, 2016

 

The following was edited from an article by Todd Michney, a visiting professor in the Ivan Allen College School of History and Sociology.

 

The 1975 Home Mortgage Disclosure Act (HDMA) required American banks to disclose data on where they lent money for homes. HDMA was prompted by evidence that discriminatory lending and disinvestment practices (“redlining”) since the 1930s were negatively impacting the quality of life in urban areas and exposing residents to potentially abusive credit terms. 

Originally intended to reveal patterns of investment, the HDMA disclosure requirements were updated in 1989 to include the reporting of the race and ethnicity of individual borrowers. The resulting data serves as a useful measure of progress toward more equitable lending. 

Legislation such as the HDMA, the 1974 Equal Credit Opportunity Act, and the 1977 Community Reinvestment Act (CRA) were intended to tackle structural inequalities difficult to remedy using 1960s civil rights laws. They originated in grassroots campaigns by neighborhood activists like Chicago’s Gale Cincotta. Some local groups succeeded in leveraging improved credit access through HDMA and CRA, and by 2004, an estimated $1.7 trillion had been redirected to urban areas as a result of such legislation.

However, studies indicate that African Americans and Latinos continue to be disadvantaged in home mortgage markets. Especially in the wake of the Great Recession and subprime mortgage crisis in the United States, it is important to understand how housing policy continues to produce unequal outcomes. HDMA and CRA have had their shortcomings and limitations, but still serve to protect opportunities for minority homeowners to build wealth. Whether they will continue to do so is an open question since even stricter reporting requirements debuting through 2018 are meeting considerable pushback from the banking industry.

Allen Hyde is an assistant professor in Georgia Tech’s Ivan Allen College School of History and Sociology, who along with coauthor Professor Mary Fischer of the University of Connecticut, analyzes HMDA data to study the seemingly counterintuitive relationship between increased Latino access to mortgage financing in the lead-up to the 2008 housing crisis, and higher observable levels of segregation. Whereas existing research on Latino homeownership has been largely limited to historic areas of residency, Hyde focuses on newer destination cities in the country’s interior and the South, of which Atlanta is one. Hyde answered several questions on what this data can tell us and about national and local patterns of Latino homeownership.

TM: What are Latino “new destinations,” and what does it mean that we seem to be seeing simultaneously rising homeownership among Latinos alongside increasing segregation rates in these cities?

AH: Starting in the 1980s, changes in immigration policy and the economy shifted Latino migration away from cities in established destination areas like California, Texas, and Florida to “new destinations,” often located in the South and Midwest. Latino communities have been developing over the last few decades in medium to large Southern cities like Atlanta, Charlotte, Raleigh, Greensboro, and Washington, D.C., meaning they moved into areas that have historically been overwhelmingly either black or white. Because Latinos were a small percentage of the population and thus were less likely to be pushed into racialized neighborhoods, they tended to be less segregated in new destinations in the 1980s and 1990s. However, other scholars like Daniel Lichter, Matthew Hall, and colleagues note that Latino-white segregation in such cities has increased rather dramatically over the last decade or so. Interestingly, this has simultaneously come at a time when Latinos have seen rising incomes and increased homeownership as a result of the Housing Boom of the early-mid 2000s. Given that homeownership signifies higher status and the achievement of the American Dream, one would predict that Latino homeowners may be less segregated from whites than their Latino renting counterparts. My colleague Mary J. Fischer and I are conducting research to determine if new Latino homeowners, as opposed to renters, still find themselves in segregated neighborhoods in new destination cities during the Housing Boom.

TM: How has this played out in Atlanta? Will you give us more of a sense of the Latino population dynamics and homeownership pattern here?

AH: Our research can speak to what is happening in Atlanta in several ways. First, Latinos are the largest ethnic grouping within Atlanta’s immigrant population, after Asians. Second, Atlanta, and Georgia more generally, has experienced dramatic growth in its Latino population. Most Latino Atlantans have origins from Mexico; however, there are sizable Puerto Rican, Salvadoran, and Guatemalan populations, as well as communities from other parts of Latin America. Furthermore, Atlanta is a diverse but segregated city. As of 2010, Latino-white segregation was substantially lower than black-white segregation, but was still moderately high.

Overall, Atlanta is emblematic of Latino migration patterns for new destinations, which comes with both good news and bad news according to our research. Increased socioeconomic status and homeownership should decrease segregation between whites and Latinos, thus policies that promote homeownership can be used to promote integration in the metro area. However, subprime loans, predatory lending, and other real estate practicescan potentially negate the positives of homeownership. Local real estate agents and mortgage lenders should be required to provide full disclosure on the details of fixed versus adjustable rate mortgages to their customers, and they should be trained to recognize and avoid racial and ethnic biases that may seep into their everyday practices.

At the same time, Atlanta’s relatively high levels of racial residential segregation raise questions about where Latino newcomers fit into the existing racial/spatial hierarchy. It is unclear whether we can expect homeownership to reduce segregation for Latinos in the future. This depends on the extent to which racialized housing markets for Latinos develop, as well as the neighborhood ethnic preferences of whites in response to demographic changes in their communities (which are especially difficult to address through policy). Finally, escaping to the suburbs no longer means upward mobility in economic and social status. Poverty rates have been increasing in the suburbs while we have seen middle class whites begin to return to the city through gentrification. These patterns will shape the neighborhood compositions of the Atlanta metropolitan area over the next decade or so.

TM: How has HMDA data traditionally been used by researchers, and do you have any general thoughts on the particular usefulness of such public data sets, in what they can tell us about lending and homeownership patterns and policymaking?

AH: HMDA data have traditionally been used by economists to look at patterns of loan denial, subprime lending, and “redlining.” These studies are more in line with the original intent of HMDA, which was to aid in the enforcement of fair lending laws. We are using these data in a somewhat different way to look at the neighborhood characteristics of new homebuyers. This type of detailed, individual level data is not publicly available at the neighborhood level of geography through other data sources with housing information, such as the U.S. Census, American Community Survey, and American Housing Survey. The annual nature of it in addition to the fact that it is whole population data (e.g., not a sample), makes it a particularly powerful dataset to test theories of neighborhood access and assess changes over time. While longer historical perspectives on race, ethnicity, and homeownership are important, we decided to focus on the period 2000 forward because this included the peak of the housing boom, as well as the bust so that we could see whether neighborhood access for Latinos changed in the wake of broader housing market shifts.