How an Asian-American group seeks to increase homeownership gains

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Lenders and policymakers could further build on a recent surge in Asian-American homeownership if they took three steps, according to the Asian Real Estate Association of America.

Among other things, the group is advising mortgage companies to increase their use of alternative credit sources "to responsibly account for different cultural and lifestyle backgrounds," a report from the group said.

Many Asian-Americans and Pacific Islanders have a thin credit file or no credit profile at all because of a cultural avoidance regarding taking on debt.

"By taking into account common sense criteria such as rent or utility payments, which are currently not counted toward a person's credit score, hundreds of thousands of AAPI and millions of Americans (especially millennials) would be considered loan-worthy without having to sacrifice the underwriting standards in lending created in the wake of the housing crash of 2007-2008," AREAA said.

The second suggested step is to increase diversity in the mortgage business by expanding the scope of the Dodd-Frank Act's Section 342, which mandated the creation of an office of Minority and Women Inclusion in each agency covered.

"Agencies, companies and regulatory bodies should be held accountable to increase multicultural outreach efforts while actively advocating for greater racial and gender representation within their own internal bodies," AAREA said. "Furthermore, each of the GSEs and federal agencies should continue to expand their office of Minority and Women Inclusion. These initiatives should not be seen as punitive measures, but instead be celebrated as progress that aligns with America's shifting economic forces."

The third step would be to continue the work with the government-sponsored enterprises on programs that would help provide a path to homeownership for potential homeowners with limited English proficiency.

For the fourth quarter of 2018, Asian-Americans and Pacific Islanders had a 58.1% homeownership rate, according to Census Bureau figures cited in AREAA's State of Asia America Report. Homeownership for Asian-Americans and most other groups has been climbing since the second quarter of 2016. At that time, the AAPI homeownership rate was 53.7%.

In comparison, over the same period, the homeownership rates for other groups were as follows: whites, 73.6%, up from 72.1%; Hispanics, 46.9%, up from 45.1%; and African-Americans, 42.9%, up from 41.7%.

For conventional loans used to buy a home in 2017, AAPIs had the highest level of application activity among minority groups, according to Home Mortgage Disclosure Act data cited in the report.

AAPIs submitted 323,882 conventional purchase loan applications, with 71.3% being approved. For whites, there was 2.96 million applications, with a 72.3% approval rate; Hispanics, 318,213 applications, with a 62% approval rate; and African-Americans, 190,552 applications with a 53.4% approval rate.

But AAPIs applied for far fewer government-insured purchase loans in 2017 than members of other groups.

There were 48,600 purchase loan applications from AAPIs, with 69.4% of those approved. Whites applied for 1.36 million loans, with 73.7% approved. There were 276,000 applications from Hispanics, with 69.8% approved and 228,798 applications from African-Americans, with 65.3% approved.

As a group, Asians had the highest average purchase and refinance average loan sizes. The average value of a purchase loan for an Asian homebuyer was $390,000 in 2017, up from $344,000 in 2014, according to the HMDA data cited in the report.

This compared with $254,000 for whites, $230,000 for Hispanics and $224,000 for blacks.

For refi loans, the average for Asians was $368,000, compared with $238,000 for whites, $223,000 for Hispanics and $213,000 for blacks.

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Diversity and equality Underwriting Purchase HMDA Refinance Housing market First time home buyers Census Bureau
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