On July 1, the CFPB released a report entitled Data Point: Asian American and Pacific Islanders in the Mortgage Market, which examines differences in mortgage characteristics among Asian American and Pacific Islanders (AAPI) subgroups based on 2020 Home Mortgage Disclosure Act (HMDA) data.
According to Jim Park, CEO & Founder of the Mortgage Collaborative and past Chair of the Asian Real Estate Association of America, Asian American & Pacific Islanders community comprise approximately 6% of the U.S. population today and have been the fastest-growing minority group over the past 10 years. But unlike the Hispanic community, where similar language creates a key connecting point, the wider Asian community speaks some 2,300 languages – a marketing challenge for the real estate and mortgage community.
The CFPB report recognizes that AAPIs are a diverse group. 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.” Now the form provides provide for the designation of “Asian” as well as the subgroups “Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese and Other Asian” and “Native Hawaiian or Other Pacific Islander” as well as the subgroups “Native Hawaiian, Guamanian or Chamorro, Samoan and Other Pacific Islander.”
Nevertheless, the report presents a descriptive analysis of the mortgage characteristics of the Asian American community as a whole. Here are some of its findings.
- Lower homeownership rate: AAPIs, as a group, have a lower rate of homeownership, around 60%, than non-Hispanic Whites which have a 75% homeownership rate.
- Eight percent of applications: Out of 18.8 million applications with race and ethnicity information in 2020, 8% (1.6 million) were submitted by AAPI consumers. Non-Hispanic White consumers submitted the majority of applications at 70%. The shares of Black and Hispanic White applications were similar to that of AAPI applications at 8% and 9%, respectively
- Higher average credit scores & lower LTV ratios: AAPIs had higher average credit scores and incomes and lower loan-to-value (LTV) ratios and combined-loan-to-value ratios (CLTVs) than those of non-Hispanic White borrowers. On the other hand, Filipinos and Hawaiian or Pacific Islanders fared worse compared to other AAPI subgroups
- Lower interest rates: AAPI borrowers paid lower interest rates than other racial groups, which likely was a result of higher credit scores and lower LTVs. However, Hawaiian or Pacific Islanders paid higher interest rates and loan costs than Asian borrowers.
- Higher average loan amounts: AAPI borrowers had the highest average loan amount and their properties were less likely to be located in minority or LMI neighborhoods compared to those of Black and Hispanic White borrowers. AAPI borrowers generally live in relatively expensive metro areas, which likely contributed to their higher average loan amounts
- Fewer loans for home purchases: 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.
- Higher denial rates: 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. However, the denial rates varied widely among the subgroups.
- More conventional loans: AAPI borrowers were more likely to take out conventional loans than any other racial group, although the pattern varied greatly among the groups.
- Fewer minority or low-to-moderate neighborhoods: AAPI 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 Hawaiian or Pacific Islanders were slightly more likely to be located in LMI neighborhoods.
- More use of depository institution mortgage lenders: 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. Hawaiian and Pacific Islanders were less likely to use depository institution mortgage lenders than Asian borrowers overall.