The Neighborhood Geography of Mortgage Lending
This staff report uses 2018–2020 Home Mortgage Disclosure Act (HMDA) data to explore how the number of financial institutions that originated mortgages adjusted for population (originators per capita) differed across neighborhoods in the United States. The report begins by examining how neighborhood-level demographic and socioeconomic characteristics were related to the number of originators per capita. Next, the report investigates whether the neighborhood-level measure of originators per capita was associated with differences in neighborhood-level application outcomes and loan terms. Last, the report asks whether there was any relationship between neighborhood-level originators per capita and transaction-level application outcomes and loan terms, focusing on comparisons within groups of transactions that posed a similar credit risk to financial institutions.
The results suggest that there was wide variation across neighborhoods in originators per capita and that the measure was associated with neighborhood-level characteristics including income, poverty, internet access, and the racial/ethnic composition of the neighborhood. Even within groups of transactions defined to pose a similar level of credit risk to lenders, loan applications in neighborhoods with a greater number of originators per capita were less likely to be rejected and consumers that took out mortgages paid lower origination charges and lower total loan costs.