The tightening flow of credit to homebuyers is not quite as recent as most people think, according to a new report (PDF) by the Furman Center for Real Estate and Urban Policy. The report, which is based on Federal Home Mortgage Disclosure Act (HMDA) data released last month, finds that the flow of credit has been slowing for the housing markets for well over a year. Across the nation, home purchase lending declined by 25% and refinance lending declined by 24% from 2006 to 2007.
“The findings help put the current crisis in context, and should help shape policymakers' responses,” said Vicki Been, director of the Furman Center. “As the Administration continues to try to bring liquidity to the market, our analysis reveals that tightening credit in mortgage lending already has had a profound impact on the housing markets for well over a year. One potential silver lining in all of this is that, in New York City, most of the drop in lending is attributable to a reduction in high cost lending, suggesting that the number of new risky loans that may become “toxic assets” is now diminishing sharply.”
However, the study also revealed some disturbing statistics about the growing disparity among approved borrowers. The number of prime loans awarded to Black and Hispanic borrowers fell by 23% and 15% respectively between 2006 and 2007, at a time when prime loans issued to white borrowers rose by 4% and those issued to Asians increased by 18%. “Traditionally, homeownership has been the way to build wealth and to give the next generation a leg up,” Been told the New York Times. “The issue of the disparity in the racial and ethnic groups in homeownership has always been an issue of great concern. We had seen improvement and now are seeing reversals of those improvements.”