The Pittsburgh Community Reinvestment Group’s (PCRG) 2014 Mortgage Lending Study – its 20th annual and the first longitudinal analysis since 2005 – reveals many Pittsburgh-area communities have yet to recover from the financial meltdown.
“Under the Community Reinvestment Act (CRA), we watch to see how banks perform in minority and underserved communities. From what we can see, they’re not performing well. It’s clear that, while some are emerging, those in low- to moderate income(LMI) and minority communities are still stuck back in 2008,” stated Ernie Hogan, PCRG executive director.
The report, which is used by several larger local governments and agencies to help determine which banks receive their deposits in the coming year, brought to light some concerning trends:
· Despite significant increases countywide since 2008, the recovery has not reached LMI and minority neighborhoods, where the total number of loans remained well below 2005 levels.
Number of loans in 2012 compared to the high point in 2005-2006:
• County as a whole: 86 percent
• Low- and moderate income census tracts: 59 percent
• Minority Census tracts: 55 percent
• 2012 denial rates in LMI and minority Census tracts were twice as high as in middle- and upper-income and white tracts. This disparity was higher in the recovery years 2009-2012 than the previous four years, and was at or close to its highest point in 2012.
• In the City of Pittsburgh, lending patterns vary widely by neighborhood. In 2012, half of the total residential mortgage loan funds went to seven city neighborhoods. At the other end of the spectrum, 46 neighborhoods captured only 10 percent of all loan funds.
• Although Allegheny County was largely immune to the housing crisis, it followed national residential mortgage lending patterns from 2005 to 12: lending declined more than 40 percent from 2005 to 2008, then rose sharply in 2009 due to increases in refinancing. In 2012, the county saw the largest increase since 2005, with loan origination jumping more than 20 percent over 2011.
• Home purchase loans continued to decline through 2011. While the number of refinancing loans in 2012 was up 13 per cent, the number of home purchase loans was down 40 per cent.
PCRG prepares the Annual Mortgage Lending Study using publicly available data designed to monitor the performance of financial institutions seeking to meet their community investment requirements under CRA. These findings are published to ensure that policy makers and community members are aware of trends and opportunities to increase available financial resources in traditionally underserved communities.
This year and previous studies can be downloaded at pcrg.org/programs/research/pcrg-research. Key findings can be found at http://www.pcrg.org/major-findings-mortgage-lending-study/ and the full study at http://www.pcrg.org/wp-content/uploads/2014/02/20th-Annual-Mortgage-Lending-Study2.pdf.
Locally, the findings have significant implications. The City of Pittsburgh has adopted a Responsible Banking ordinance, which requires it to utilize the CRA data to determine where next year’s deposits will be placed in accordance with a bank’s CRA score. The Port Authority has also adopted Responsible Banking policy, and the Urban Redevelopment Authority of Pittsburgh and Pittsburgh Public Schools follow similar policies with their deposits.
All told, more than $1.5 billion of local public funds utilize this information in their depository decision-making.
“Now is the time for us to get serious about providing loan products and access to capital that works for these communities,” added Mr. Hogan. “Pittsburgh cannot continue its internationally-acclaimed rebirth if huge swaths of its population – and the very neighborhoods on which our rebirth is built – are left behind. We stand ready to work with lending institutions to responsibly bring resources to those most in need of the chance for building wealth in these very communities. Pittsburghers are known for helping each other out. Let’s prove people right.”