Changing Face of America Will Test the Housing Market

The mortgage market has a long history of underserving communities of color and that oversight, long deemed a moral problem, eventually will become a broader economic challenge as people of color make up more than half the U.S. population by 2045.

This Washington Post column notes that Hispanic Americans will account for an overwhelming amount of demand for housing, particularly those buying their first home. Yet the underwriting rules used by banks and other mortgage lenders to assess credit risk are disconnected from how Hispanic households manage their finances. Extended family members contribute to paying monthly expenses like a mortgage; Hispanic borrowers tend to be self-employed and tend to purchase with cash rather than credit.

Yet mortgage underwriting rules typically consider only the income of the person listed on the mortgage, prefer documentation like a regular paycheck from an employer, and rely on credit history. Unless the mortgage industry figures a way to better serve ethnic groups, homeownership rates among these communities will stagnate and these consumers will miss an opportunity to create wealth.

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