U.S. Economic Outlook: October 2018

Mortgage Lending in Underserved Areas

By Frank Nothaft Housing Affordability, Real Estate

Housing policy experts and community activists have long been concerned about access to mortgage credit in underserved neighborhoods.  Insufficient access to credit, attributable to outdated underwriting guidelines or a legacy of discrimination, can hinder housing wealth creation and economic development. 

For many years, the federal government’s collection of Home Mortgage Disclosure Act (HMDA) data has provided one benchmark of whether advances are being made in providing credit to these communities.  Disadvantages with this loan-level data set are the long lag before their release and the public availability of only calendar year data rather than higher frequency, such as monthly. 

Low Income Area Share in 2018

While descriptions of what constitutes an underserved area may vary, one metric is the Federal Housing Finance Agency’s (FHFA) definitions of both low-income and minority census tracts.[1]  The Agency uses these to assess the affordable housing performance of the government-sponsored enterprises it regulates.  We compared the annual trend in the HMDA data with what we have in CoreLogic’s public records, and then used CoreLogic data to update the trend through July 2018. (Figure 1)

What we found was that CoreLogic’s public records tracked very closely with the trends in the HMDA data.[2] Further, the share of home-purchase mortgage lending in low-income areas or moderate-income minority census tracts has increased steadily from the low point in 2012 and 2013.  For 2018 through July, this share was the highest since 2010.

FHA has larger share

The increase in 2018 occurred even though the FHA share of purchase-mortgage lending is less than it was one year ago.  FHA-insured loans tend to have a higher share of low-income and high-minority census tract lending than conventional. (Figure 2) But the share of conventional loans made in low-income and minority areas has steadily grown over the last six years, in part because Fannie Mae and Freddie Mac have begun to fund conventional loans with three-percent down payment and up to 50-percent debt-to-income ratios.

We will continue to monitor these trends with our public records data. Further increases in the share of loans made in underserved neighborhoods is likely as their local economies improve in the coming year. 


The analysis used the FHFA Low-Income Areas File for each year, 2012-2018.  The 2012 Low-Income Areas File was also used for the public record analysis prior to 2012.  Because the Low-Income Areas Files for 2012-2018 use 2010 census tract geography, and the HMDA began to require 2010 census tract geography for the 2012 reporting year, a comparison with HMDA data prior to 2012 would not be comparable.  The public records and HMDA analytic population was all first-lien, home-purchase loans, including conventional, FHA, VA and RHS loans.  Analysis of 2017 HMDA data used the dynamic loan application register files, accessed on September 17, 2018.

[1] A low-income census tract is a census tract in which the median income does not exceed 80 percent of the area median income.  The FHFA defines “minority census tract” as any census tract that has a minority population of at least 30 percent and a median income of less than 100 percent of the area median income.  See https://www.fhfa.gov/DataTools/Downloads/Pages/Underserved-Areas-Data.aspx

[2] Analysis of the HMDA data is shown beginning 2012 because data for 2009-2011 use 2000 census tract boundaries and are not comparable to 2010 census tract geography.  The CoreLogic public record analysis uses 2010 census tracts for all years.

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