Home Lending to Communities of Color in California 2021

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Rawan Elhalaby

Associate Director of Economic Equity

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Rawan Elhalaby

Associate Director of Economic Equity

Rawan Elhalaby (she/her/hers) is the Associate Director of Economic Equity at the Greenlining Institute where she oversees bank accountability efforts using the Community Reinvestment Act. As the daughter of working class refugees, Rawan is all too familiar with the obstacles to achieving self-sufficiency in the United States for low-income and immigrant families. As such, she has spent her career addressing these obstacles at Greenlining and one-on-one with recently arrived refugees from Iraq, Somalia, Syria, and Afghanistan (among others) to San Diego at the International Rescue Committee. She has also worked as a policy consultant to the Consumer Financial Protection Bureau, the County of San Diego, the Western Regional Advocacy Project, and the Dellums Institute for Social Justice. Rawan holds a degree in Political Science from San Diego State University and a Master of Public Policy from UC Berkeley’s Goldman School of Public Policy.

Economic Equity Policy Staff

Everyone should be able to live in a home that is affordable, safe, resilient to the impacts of climate change, and contributes to equitable wealth-building rather than dragging people down further into debt. Yet, for communities of color that have faced decades of disinvestment and continue to experience disparities in access to home loans, the future we envision is far from our reality today.

The Greenlining Institute report, Home Lending to Communities of Color in California 2021, is based on 2021 lending data reported under the federal Home Mortgage Disclosure Act. For the past 6 years, Greenlining has analyzed HMDA data and published findings on an annual basis (please find past reports here). During this time, disparities in home lending have remained consistent, with little to no improvement year-over-year. 

Findings:

• Communities of color do not access home purchase loans at rates comparable to white communities. Latino households access 21% of the state’s home purchase loans, despite making up over 40% of the population, and Black households access 3% of home loans, while making up over 5% of the population. White households are especially overrepresented in home purchase originations relative to their share of the population, and Asian households are slightly overrepresented. 
• Women of color, 30% of the state’s population, receive just 8% of home purchase loans by the top 15 lenders in California, consistent with 2020. Women of color are also more likely to access a loan from a nonbank lender than from a mainstream bank. The disproportionate caretaking burdens and responsibilities of women of color are compounded by the gender pay gap and racial wealth gap—all of which are compounded by an inability to access home loans. 

• Asian ethnic communities do not access home loans at the same rate. While home lending to all Asian households in California appears to exceed their share of the population—rising to 19.4% in 2021 from 15.5% in 2020—there are disparities in access for different subgroups within the Asian population, emphasizing the need to collect and disaggregate lending data. 
• Nonbank lenders are more likely to make home loans to low-income borrowers than traditional banks—with both conventional and government-subsidized loans. 
• Low-income white borrowers are more likely than low-income borrowers of color to receive a home loan in over half of the six regions proportional to their percentage of the population. Low-income Black and Latino borrowers are more likely to receive home purchase loans from nonbank lenders proportional to their percentage of the population. 
• Nonbank lenders dominate several regional markets in California and play an increasing role in home lending across the state. Ten of the top 15 home purchase lenders are largely unregulated nonbanks that do not offer traditional banking services and operate largely online. These nonbank lenders are also not subject to the Community Reinvestment Act, therefore their lending is not regularly assessed to determine whether they meet the credit and borrowing needs of the communities where they operate. Like last year, Black and Latino households were more likely than other racial groups to access home purchase loans from nonbank lenders. In the Fresno Metropolitan Area, all 15 of the top 15 lenders were nonbanks. 
• Low-income and people of color borrowers are more highly represented in government-subsidized loans than conventional loans, consistent with nationwide trends. Some lending institutions in this study did not issue any government-subsidized loans in some areas in 2021, and these loans represent a smaller part of the market than conventional loans. Black and Latino borrowers are particularly likely to receive government-subsidized loans. 

Homeownership forms the bedrock of wealth building. Home lending to communities of color must increase to establish financial stability for future generations. This will require a comprehensive effort by nonbank lenders, traditional banks, financial regulators and state and federal policymakers to ensure that a continuous practice of racial equity and transparency is applied to the deployment of financial products, services and investments. 

As our research shows, across California’s regions people of color are less likely to successfully access  home loans despite making up a majority of the state. This is of particular concern to Black, Latino  and immigrant communities.

Nonbank lenders can provide important  competition to traditional banks and drive down costs for consumers while serving customers who currently fall through the cracks, but inadequate regulation of these lenders remains a concern. It will be incumbent upon these nonbank lenders, which are not regulated by the Community Reinvestment Act, to proactively support California’s communities of color and demonstrate their commitment to closing the racial wealth gap through equitable, safe and affordable products.

Rawan Elhalaby

Associate Director of Economic Equity

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