Each year, the federal government releases a comprehensive database on mortgage lending activities across the US based on activity reported by lending institutions under the Home Mortgage Disclosure Act (HMDA).
This year, there were a number of changes to the database; some changes from 2015 revisions expanded what we can know about mortgage applications (e.g., the age of borrowers) and other 2017-era changes limited that knowledge (e.g., suppressing applicant credit information).
Here’s what the data reveals about mortgage lending activity in Philadelphia.
- Overall lending activity largely mirrors the US. As with the rest of the country, Philadelphia had an uptick in purchase mortgages and downturn in mortgage refinances (the latter believed to be a function of rising interest rates between 2017 and 2018).
- Approximately 70% of all applicants for mortgages to purchase homes are successful. However, origination rates for minority applicants, lower income applicants and applicants seeking purchase mortgages in minority and lower income areas are much lower. Over the last few years, these disparities have improved by a percentage point or two, but the differences persist.
- Differences in approvals by race persist even when comparing applicants of similar incomes. For example, Black applicants with incomes over $57,000 in 2018 were denied more frequently than White applicants with incomes under $57,000 for both conventional mortgages (12.8% v. 9.0%) and government-insured mortgages (13.8% v. 9.1%).
- Market share for government-insured mortgages remains substantial in minority and lower/modest income areas. Although the government-insured mortgages (predominantly FHA and VA in Philadelphia) market share is trending lower, approximately 39% of home purchase mortgages in substantially minority areas compared to 20% in not substantially minority areas had government insurance.
- There are large parts of Philadelphia where only a small fraction of all home purchases has HMDA-reported mortgages. That is likely a function of a larger fraction of cash sales and/or lenders that operate in those markets that are not HMDA reporters. This phenomenon is overwhelmingly found in lower income and minority areas – some of which are heavy “investor” markets (e.g., near Temple University). Without ample mortgage credit for homes to transact, traditional homeowners will likely face considerable challenges purchasing a home in these areas or refinancing their existing mortgages.