Our March 28 webinar presented findings, plans for the next generation of the Community Lending Fact Book & Data Portal. Download a copy of the 2021 Data Edition and get highlights from article 1 of our new series on reframing the racial wealth gap, a look at homeownership.

You can also download a PDF of the presentation slides.

By Natalie Cheng

Every year, Woodstock analyzes mortgage lending trends in Home Mortgage Disclosure Act (HMDA) data and finds evidence of the same disparities in lending by race and ethnicity across Chicago and the 7 County Chicago Region (this region includes Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will counties and will be referred to as “the Chicago region”).


Black and Latino households qualify for smaller dollar mortgages, have lower property values, lower origination rates, and higher denial rates than Whites (contact us if you’re interested in this year’s numbers). 1We do not include those identifying as “Asian” or “Other,” nor do we include those who did not report a race at all. Because there are unique and crucial differences within Asian and Other racial groups, including these populations in this analysis would misrepresent trends in these groups. Here, we choose just to focus on Black, Latino and White household outcomes. Analyses of Asians, those who do not report a race, and those who identify as Other deserve separate, focused studies which we hope to do in the future.

While not surprising, it is important to continue naming these disparities. We also know that sometimes telling the “same” story over and over has the unintended and unfortunate consequence of stifling the story itself. This is a cost we cannot afford. That’s why we’re highlighting different areas in 2021 data where disparities are most obvious.

By lifting up trends in these areas, our goal is to reveal another layer of the onion of inequitable mortgage lending. We hope this opens up more space for partners (like you!) to take action, adding more fuel to the fire for change.

For this analysis, we’re focusing on trends in where loans were made (CRA-regulated market vs non-CRA regulated market) and the type of loans made (conventional vs FHA).

Where loans were made: Increase in Non-CRA Regulated Lending

The regulated market is made up of lenders covered by federal CRA requirements. The CRA (Community Reinvestment Act, 1977) is a federal law meant to advance economic and racial equity by requiring lenders to invest back into the diverse and low-and moderate-income communities they serve.

Non-CRA lenders (“unregulated lenders”) do not have this accountability. With less regulatory oversight, loans originated by unregulated lenders are easier to access but also generally carry higher loan costs and less favorable terms. Unregulated lenders are also much less likely to offer other financial products and to invest in the communities they serve.

Where loans were made: Loans from Non-CRA-Regulated Mortgage Lenders (“Unregulated Lenders”)

Fewer Barriers…

  • Unregulated lenders offer loans with lower borrower requirements such as a lower credit score. It is easier to get a loan from an unregulated lender than a regulated lender.
  • Unregulated lenders are more likely to be online lenders. By not having to visit a physical bank, it is easier to apply for a mortgage (if you have access to technology). This is especially salient in areas where physical banks are scarce, which includes many less-white, lower-income communities.

… But Higher Costs

  • Because unregulated lenders are more likely to be online and/or only provide mortgages, they are far less likely to serve local communities in other ways that build generational wealth (through things like small business loans and other investment accounts).
  • While it’s great that loans from unregulated mortgage lenders are easier to access, these loans are often riskier, both to lenders and borrowers. Lenders account for greater risk by adding fees to loans. If a borrower defaults on these higher cost loans, the results are often more financially detrimental.

In Chicago, 2021 activity in the regulated market fell 8% while activity in the unregulated market increased 13%.

In the previous year (2020), mortgage activity was abnormally high because of a large increase in refinancing in response to very low interest rates. The 2021 decline in regulated market activity is really a return to normal, rather than a “real” decline.

What is more notable is the increase in unregulated market activity. Why? Because people of color and lower-income borrowers are much more likely to borrow in the unregulated market: In 2021, overall lending increased in the market that serves many lower-income, Black, and Latino groups with costlier loans and little-to-no additional wealth-building opportunity.2Because unregulated lenders are more likely to be online and/or only provide mortgages, they are far less likely to serve local communities in other ways that build generational wealth (through things like small business loans and other investment accounts).

A closer look at 2021 data tells more of the story.

2021 Data

Unregulated market borrowers are more likely to be Black, Latino, and low-to-moderate income (LMI).

  • Of those receiving mortgages in the Chicago region in 2021, 75% of Black households and 68% of Latino households and LMI groups borrowed in the unregulated market, compared to 63% of White households.

Unregulated loan activity increased far more among Black and LMI groups, and little (if at all) among White groups.

  • In Chicago, Black borrowers accounted for 33% of the increase in unregulated mortgage activity, while White borrowers accounted for just 2%. 62% of added borrowers were LMI.
  • In the Chicago region, the number of White borrowers declined 4%. Black borrowers accounted for 33% of the increase in unregulated mortgage activity. 92% of added borrowers were LMI.

Unregulated loans come with higher costs.

Loans made in the unregulated market are more likely to come with total loan costs greater than $5,000.

  • In Chicago, 44% of loans from unregulated lenders carried costs greater than $5,000, compared to only 27% of loans from regulated lenders.

Both in the regulated and unregulated markets, loans with costs greater than $5,000 grew between 2020 and 2021.

  • In Chicago, loans with costs greater than $5,000 grew 9% in the unregulated market and 4% in the regulated market.

Unregulated loans are more likely to be non-conventional FHA loans (which are also higher-cost).

Conventional loans are traditional mortgage loans that use standard loan qualifications. Non-conventional loans have different terms of qualification. The most common type of non-conventional loan is an FHA loan, insured by the Federal Housing Administration (FHA), a government agency. In 2021, 81% of non-conventional loans in Chicago were FHA loans. FHA loans are meant to increase access to homeownership for lower-income groups. As such, qualifications for FHA loans are lower, requiring a smaller down payment and lower minimum credit score.

Yet even as FHA loans serve borrowers of lower financial status, these loans tend to be more expensive than conventional loans. This is because FHA loans require mortgage insurance payments for the life of the loan, and also carry other fees associated with the lower financial status of FHA borrowers.

  • In 2021, 13% of loans made in Chicago’s unregulated market were FHA loans, compared to 3% of loans in the regulated market. 77% of FHA loans made in the unregulated market had loan costs greater $5,000, compared to just 34% of conventional loans.

In addition to serving low-income borrowers, FHA loans are also more common among Black and Latino households.

  • In 2021, 31% of all loans to Black borrowers in Chicago were FHA loans, compared to just 6% of all loans to White borrowers. 19% of all loans to Latino borrowers were FHA loans.
  • Unequal incomes and wealth holdings by race and ethnicity, particularly between Black and White households, certainly have something to do with these differences.3Hendley & Cheng (2023, March 24). Reframing the Racial Wealth Gap. Woodstock Institute.
  • Black applicants generally have lower incomes than White applicants, and it follows that more Black households would take out FHA loans compared to White households. However, even when incomes and wealth are equalized at “good” levels, Black borrowers still received more FHA loans than conventional loans, at a rate seven times higher than White borrowers.4“Good” applicants include only those applicants, Black or White, who had Loan to Value (LTV) ratios less than 90% and Debt to Income (DTI) ratios less than 45%. In general, these figures are used by mortgage lenders to assess the financial status and associated risk of an applicant. Each in their own way, LTV and DTI account for the income and wealth of the applicant, and can be used as a proxy for income and wealth. Equalizing these figures at the “good” levels for both Black and White applicants allows us to “account” for income and wealth differences in this way.
  • 14% of “good” Black applicants received FHA loans, compared to just 2% of “good” White applicants. 7% of “good” Latino applicants received FHA loans. This shows evidence of loan “steering” and inequitable lending practices based on race and ethnicity.

So what’s the overall takeaway? In 2021, growth in lending affected lower-income Black and Latino groups most. And this increase included many high-cost loans from lenders that have little-to-no incentive or ability to invest in the long-term wealth of individuals and neighborhoods.


In 2021, mortgage activity in the non-CRA-regulated (unregulated) market increased. Lower-income, less-white borrowers are more likely to borrow in the mortgage market of unregulated lenders. At the same time, these loans come with higher costs. Further, unregulated lenders are less likely to invest in the long-term economic health and well-being of the communities in which these lower-income, Black, and Latino groups live.

We look at trends year by year in static numbers, but these numbers are lived out in the daily experiences of human lives, families, and neighborhoods of different races, ethnicities, and economic status. The number of vacant lots a child sees on their street, the type of home a mother comes back to after work, the future of the small business your uncle runs, these are the embodiment of numeric gaps.

We will keep telling the same story, doing our best to elevate the narrative in ways that are compelling and different, but always staying true to the reality of racial and economic disparities. The goal is to speak the truth to compel action to repair and achieve equity. Because this story is not fiction. This story is fact that demands action.

Ways to take action

  1. We discuss how to address homeownership disparities and ways to elevate other wealth-building opportunities in our new “Reframing the Racial Wealth Gap” research series available here.
  2. We also plan to add policy recommendations to address some of the concerns our research surfaced. Please check back here, or you can sign up to receive an email alert when we add this content or follow us on LinkedIn.
  3. Join our partners in this work. Check out and follow these groups: Resident Association of Greater Englewood (RAGE), Housing Action Illinois, Oak Park Regional Housing Center, Chicago Area Fair Housing Alliance (CAFHA), Heartland Alliance, Chicago Bungalow Association (CBA), and Neighborhood Housing Services of Chicago (NHS Chicago).