The CFPB recently issued a report entitled Data Point: Asian American and Pacific Islanders in the Mortgage Market. The report briefly examines differences among subgroups of Asian American and Pacific Islanders (AAPI) based on the 2020 Home Mortgage Disclosure Act (HMDA) data. In issuing the report the CFPB stated that “[e]xisting studies often portray AAPI borrowers as similar in characteristics to non-Hispanic White borrowers and thus imply that the group fares well. However, such characterization disregards some AAPI subgroups whose characteristics may be similar to Black or Hispanic White borrowers and therefore may find difficulty in accessing lower-priced credit.” The CFPB also advises that the information in the report “is not intended to be an in-depth and comprehensive analysis, but offers an initial look at heterogeneity in mortgage characteristics that exists within the AAPI community.”
Prior to 2018, the HMDA data collection form for applicant demographic data provided for the designation of “Asian” and “Native Hawaiian or Other Pacific Islander.” Starting in 2018, the form was expanded to provide for the designation of (1) “Asian” as well as the subgroups “Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese and Other Asian” and (2) “Native Hawaiian or Other Pacific Islander” as well as the subgroups “Native Hawaiian, Guamanian or Chamorro, Samoan and Other Pacific Islander.” An applicant may designate one or more subgroups. For both the “Other Asian” and “Other Pacific Islander” subgroup there is a free form field in which the applicant can fill in the specific subgroup. Overall, the report addresses (1) the variation in mortgage characteristics by race and ethnicity and across the AAPI subgroups, (2) the characteristics of borrowers by race and ethnicity and across AAPI subgroups, and (3) the distribution of mortgage lender types by race and ethnicity and across AAPI subgroups.
The report includes the following observations:
- “Using the detailed race and ethnicity information in the 2020 HMDA data, the [CFPB] finds that certain AAPI subgroups fared better than others in the mortgage market. For example, Chinese and Asian Indian borrowers paid lower interest rates, on average, than non-Hispanic White borrowers. On the other hand, even though they had higher average credit scores and incomes, and lower combined-loan-to-value (CLTV) ratios, their denial rates were higher than that for non-Hispanic White borrowers.”
- “Hawaiian or Pacific Islander (HoPI) borrowers had lower income and credit scores, higher CLTVs, debt-to-income ratios (DTI), and denial rates than the other AAPI subgroups. Furthermore, although Vietnamese, Native Hawaiian, and Other Pacific Islander borrowers had higher average credit scores and incomes, and lower median DTIs and CLTVs than Black and Hispanic White borrowers, their denial rates were similar to those for Black and Hispanic White borrowers.”
The CFPB notes caveats to the findings, including that there may be differences among AAPI applicants in the decision of whether or not to designate a subgroup, and that a more extensive statistical analysis of all applicant credit characteristics, which affect underwriting decisions, was beyond the scope of the report.
The report indicates that:
- Of the total 1.6 million closed- and open-end applications submitted by AAPIs, Asian and HoPI consumers constituted 96% and 4% of these applications, respectively.
- AAPI borrowers were much less likely to take out loans for home purchases than any other racial group, although there are variations among AAPI subgroups.
- AAPI borrowers were more likely to take out conventional loans than any other racial group, although there are variations between Asian and HoPI borrowers and among AAPI subgroups.
- The pattern for average AAPI home purchase loan characteristics, some of which are noted below, is largely driven by Asian rather than HoPI borrowers.
- AAPI borrowers had the highest average loan amount and their properties were less likely to be located in minority or low-to-moderate income (LMI) neighborhoods compared to those of Black and Hispanic White borrowers. However, the properties of HoPI borrowers were slightly more likely to be located in LMI neighborhoods, but less likely to be located in metro areas compared to those of Asian borrowers
- AAPI borrowers paid lower interest rates on average than any other racial group, even though a larger share of their loans were jumbo loans. However, HoPI borrowers took out mortgage loans with higher interest rates compared to Asian borrowers.
- On average, the denial rate of AAPI borrowers was higher than that of non-Hispanic White borrowers and lower than that of Black or Hispanic White borrowers, although the denial rates varied greatly across AAPI subgroups.
- AAPI borrowers were more likely to use depository institution mortgage lenders than Black and Hispanic White borrowers but were less likely to use such lenders than non-Hispanic White borrowers. However, HoPI borrowers were less likely to use depository institution mortgage lenders than Asian borrowers overall.
The report concludes with the following:
“Policy debates and academic research surrounding inequalities in home ownership rates and the resulting racial wealth divide have garnered attention recently. However, much of the discussion has focused on the Black-White divide, often overlooking issues within Hispanic or AAPI communities. A better understanding of the differences in AAPI mortgage characteristics can potentially shed light on why a wealth divide exists within these communities. This report only presents descriptive evidence on the differences among AAPI mortgage borrowers. We leave it to future research for an investigation of why such differences exist.”