Chicago Area Community Lending Fact Book breaks down 2022 neighborhood-level mortgage trends

For Immediate Release:
October 3rd, 2023

Contact:
Rob Mayo (Woodstock Institute)
rmayo@woodstockinst.org | 312-368-0310 x 2024


CHICAGO – In 2022, Black and Latine households continued to receive government-insured, higher-cost loans at much higher rates even when they appeared to qualify for “better” conventional loans with less fees. At the same time, amidst an overall cooler mortgage market in 2022, lending to White borrowers fell at a much higher rate than lending to Black and lower-income borrowers.

Woodstock Institute’s Chicago Area Community Lending Fact Book: 2022 Data Edition analyzes mortgage lending trends throughout Chicagoland in 2022, drilling down to the neighborhood level. Each community area includes data on demographics, detailed annual mortgage data, top lenders, originations over time, foreclosures, and more.  

To help assess disparities in loan costs, Woodstock researchers measured rates of Federal Housing Administration (FHA) loans among borrowers. Historically, due to less stringent borrower requirements, Black, Latine, and low-income people tend to take out FHA loans at much higher rates. However, higher fees and interest rates generally render these loans more expensive over the life of the loan relative to conventional loans of the same size. 

The Community Reinvestment Act (CRA) requires banks to invest back into and provide financial services to the low- and moderate-income communities they serve. To monitor the efficacy of the CRA in fulfilling this mission, the Woodstock measures rates of borrowing from financial institutions subject to the CRA against those that are not. Loans from lenders not subject to the CRA are more likely to be higher cost and/or FHA loans. Black, Latine, and lower-income groups borrow more frequently from lenders not subject to the CRA.

In 2022, Black and Latine borrowers in the Chicago area continued to take out far more high-cost FHA loans even after controlling for differences in financial qualification.

  • In 2022 in the 7-county region, Black borrowers were over 8 and 5 times as likely as Asian and White borrowers to receive an FHA loan, and Latine borrowers were nearly 6 and 4 times as likely as Asian and White borrowers to receive an FHA loan: 35% and 23% of Black and Latine borrowers received FHA loans, compared to just 4% and 6% of Asian and White borrowers, respectively.

  • After controlling for financial qualification, well-qualified Black borrowers received FHA loans more than 5 and 11 times as often as equally-qualified White and Asian borrowers, respectively. Well-qualified Latine borrowers received FHA loans more than 3 and 6 times as often as equally-qualified White and Asian borrowers, respectively. The gap between similarly-situated Black and White borrowers widened from 2021 to 2022.

“These findings suggest that policies meant to make homeownership more accessible for people of color are struggling to produce the outcomes we want,” said Horacio Méndez, President and CEO of Woodstock Institute. “Despite the intent of the CRA to spur lending in historically disinvested communities, people of color and low-income people are consistently more likely to borrow from institutions not subject to the CRA, and pay more for it. Furthermore, the higher rates of FHA loans among financially well-qualified borrowers of color supports anecdotal evidence that borrowers of color are being steered into FHA loans far beyond scenarios where they seem appropriate. The good news is that solutions exist, and Woodstock is actively engaging with stakeholders to enact them.”

At the same time, while overall applications and originations fell to half the amount of activity in 2022, declines were concentrated among White and Asian households, especially in Chicago.

  • In the City of Chicago, White households accounted for more than 8 times the overall drop in lending than Black households.

  • In the Chicagoland 7-county area, loans originated to Black, Latine, and lower-income borrowers fell 39%, 44%, and 32% respectively, compared to 64% and 60% for White and Asian borrowers, respectively. 

Since 1986, Woodstock has used data made available by the Home Mortgage Disclosure Act (HMDA) to create our Community Lending Fact Books as a tool for understanding access to loans and financial opportunity in the Chicago area. To learn more, download the full 2022 Chicago Area Community Lending Fact Book, or check out our Community Lending Data Portal.

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Woodstock Institute advances economic and racial justice within financial systems through research and advocacy across Illinois and the United States. Among our areas of focus are predatory lending, access to banking, debt collection, and municipal fines and fees.