Home Lending to Communities of Color in California

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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

Home Lending to Communities of Color in California

Owning a home is the primary way most Americans build wealth for their families, yet what is a modest goal in most parts of the country is being pushed further and further out of reach for most people of color in California. While the homeownership gap is an issue throughout the country, the rate of Black and Latino homeownership is significantly worse in California compared to other states. At the national level, the Black and Latino homeownership rates are 42 percent and 47 percent, respectively, compared to 35 percent and 42 percent in California.

Home lenders, including both traditional banks and non-bank lenders, have an important role to play in ensuring that all communities have access to affordable, safe home loans that increase family wealth and reduce the racial wealth gap.

The Greenlining Institute assessed Home Mortgage Disclosure Act lending data from six metropolitan areas of California: Sacramento, San Francisco, Oakland, Fresno, Los Angeles and San Diego. This report evaluates the lending overall in those regions and the top 15 lenders in each region for 2019. Although there are slight variations among the largest lenders for each region, the findings across the regions were consistent.

Report Findings:

• Communities of color do not access home purchase loans at rates comparable to White communities. Specifically, Latino households access 22 percent of the state’s home purchase loans, despite making up over 39 percent of the population, and Black households access three percent of home loans, while making up over five percent of the population. White households are especially overrepresented in home purchase originations relative to their share of the population.
• Women of color receive seven percent of home purchase loans by the top lenders in California, while making up 30 percent of the state’s population. Women of color are underrepresented in their share of home purchase loans and are more likely to access a loan from a non-bank lender than from a mainstream bank. The disproportionate caretaking burdens and responsibilities of women of color are compounded with a wage gap and wealth gap that widen with an inability to access home loans.
• Low-income White borrowers are more likely than low-income borrowers of color to receive a home loan. In several regional markets, some lenders do not make any loans to low-income borrowers from communities of color. When Black, Asian and Latino low-income households do access home purchase loans, it is more likely to be from a non- bank lenders.
• Non-bank lenders are more likely to make home loans to low-income borrowers than traditional banks. In several regional markets, non-bank lenders make twice as many home purchase loans to low-income borrowers as mainstream banks.
• Non-bank lenders dominate several regional markets in California and play an increasing role in home lending across the state. In California, nine of the top 15 home purchase lenders are unregulated non-bank lenders that do not offer traditional banking services, operate largely online, and are not subject to the Community Reinvestment Act, so their lending is not regularly assessed to determine whether they meet the credit and borrowing needs of the communities where they operate. In our analysis, Black and Latino households were more likely than other racial groups to access home purchase loans from non-bank lenders.

Report Recommendations

Homeownership is the bedrock of wealth building. It is critical that home lending increases to communities of color in order to establish financial stability for future generations. This will require a comprehensive effort by non-bank 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 products, services and investments.

In light of our research, The Greenlining Institute recommends the following steps be taken:

1. More loan products and outreach tailored to low and moderate income families. These targeted investments in communities are not only the right thing to do, they will lead to increased business for lenders and improve a lender’s bottom line.
2. More funding to nonprofits led by people of color to support homeownership counseling. It is important that first-time homeowners, especially those from communities which are often targeted by predatory lending, have as much information and training as possible to help them make important financial decisions during the home buying process.
3. Increase branch presence in rural communities as well as support for broadband deployment. Rural communities, especially communities of color, are often left out of most traditional banks’ footprint. Increased attention must be paid to both bank branches as well as philanthropic support for broadband deployment in underserved communities, which becomes absolutely vital as more and more banking services shift online.
4. Increase cultural competency in both products and marketing. Lenders should invest heavily in ethnic media for their marketing efforts, which will help them both ensure that they reach consumers not well served by mainstream media as well as help to support businesses owned by people of color. Further, lenders should prioritize delivering their products and services in the languages spoken by California’s diverse communities and ensure that all communities, regardless of English proficiency, are protected against predatory practices and treated fairly.
5. Stronger, win-win community partnerships. Lenders, regardless of whether they are traditional banks, FinTech firms or non-bank mortgage institutions, should meet with California community groups annually to hear from those most impacted by their lending practices.
6. More targeted support from federal and state regulators. At the federal level, the Home Mortgage Disclosure Act should be made stronger, more accessible, with easier to access data that is disaggregated by different racial and ethnic communities. At the state level, California regulators should help to lead the discussion around the evolving, technology-oriented mortgage market with the goal of incentivizing innovation and lower costs while protecting consumers and underserved communities.

Rawan Elhalaby

Associate Director of Economic Equity

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