July 1, 2001
Joint Center for Housing Studies, Harvard University

This paper examines trends in prime-market mortgage lending to low- and moderate-income families and to families living in underserved areas, hereafter affordable lending, during 1993- 99. In the prime market, affordable lending was increasingly done by mortgage bank subsidiaries of depositories. Savings institutions and independent (unaffiliated) mortgage banks provided a declining fraction of all affordable loans. Against this backdrop, the analysis looks at variations in affordable lending at the level of the lending organization with a special emphasis on the factors that explain that variation: We examine the role of lender size, local economic conditions, industry concentration, and cultural affinity on lenders' affordable lending shares. In general, we find negative relationships between lender size and affordable lending, though there are offsetting positive relationships among very large depositories. The effects of economic conditions on affordable lending are decidedly mixed: Lending to low- and moderate-income families is greater in markets with a stronger local economy, while lending to traditionally underserved areas exhibits an inverse relationship. We find positive relationships between industry concentration and affordable lending among savings institutions and mortgage companies. Finally, we do generally find a positive relationship between affordable lending and minority ownership of lenders. However, the small number of minority-owned institutions in our data suggests caution in interpreting this result.

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