Banks Are Walking Away from Low-Income Homebuyers
Low- and moderate-incomes only made up 26.3 percent of borrowers in 2017, according to recently released federal data on mortgage lending from the Consumer Financial Protection Bureau. This was a decline of 10.3 percent from the 36.6 percent figure reported in 2009.
The change is partially the result of federal rules that cracked down on subprime lending. Soaring housing costs have also resulted in many potential first-time homebuyers being unable to enter the market.
The data also uncovered a major change: big banks are moving away from mortgage lending altogether. Instead, independent mortgage companies, or non-banks, have doubled down on volume and now account for 56 percent of all home loans.
As banks have moved away from the mortgage business, they have abandoned lending to lower-income black and Hispanic buyers, who often apply through Federal Housing Administration loan programs. In 2017, only 15 percent of new mortgage borrowers at the top three largest banks in the nation were low-income as compared to 29 percent at the three largest non-banks.
Large banks are blaming their departure from FHA lending on the penalties they incurred as a result of litigation brought against them by the Department of Justice under the False Claims Act.
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