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HOME MORTGAGE LOANS.   Term Paper ID:22004 Click to get this paper

Essay Subject: Racial/ethnic issues, discrimination, loan alternatives, interest rate comparisons, market environments, default rates. Tables.... More...

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Paper Abstract: Racial/ethnic issues, discrimination, loan alternatives, interest rate comparisons, market environments, default rates. Tables. Paper Introduction: REAL ESTATE LOANS AND INTEREST Introduction This research examines the mortgage loan market. Facets of the market examined include (1) comparison of loantype alternatives available in the contemporary market, (2) interest rate comparisons in relation to selected loantype alternatives, and, (3) current and projected mortgage loan market environments. Comparison of LoanType Alternatives Available in the Contemporary Market Adjustable rate mortgages (ARMs) are one of the most popular loantypes available in the contemporary mortgage loan market (Cotton, 1995, pp. 3843). ARMs are especially Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. American Banker, 16 (26), 14. 43). Home Loan Approvals by Racial and Ethnic Background, and ApplicantIncome: Government-Backed Mortgages 199 __________________________________________________________ Racial/Ethnic Group Mortgage Loan Approvals (%) -------------------------------------------- Income As A Percent of Metro Area AverageLess Than 8 % 8 -99% 1 -12 % More Than 12 % ------------ ------------- ------ -------- -------------- American Indian/ 63.5 7 .2 68. 75.2 Islander Black 51.4 6 .8 63.8 65.7 Hispanic 58.1 67.7 69.6 71.1 White 69. New origination volume for 1995 will be approximately 18percent lower than 1994" (Cotton, p. Foust, D. 49). (1995, 8 February). Second, if discrimination in mortgage lending were occurring,mortgage bankers would lend to only the most credit worthy minorityapplicants, thereby causing minority mortgage lending to be more profitablethan mortgage lending to whites. Facets of the marketexamined include (1) comparison of loan-type alternatives available in thecontemporary market, (2) interest rate comparisons in relation to selectedloan-type alternatives, and, (3) current and projected mortgage loan marketenvironments. Credit Union Executive, 35(1), 4-5. Cotton, J. First, Becker (p.18) contends that the data provide no basis for making such an assessmentbecause default rates, late payments, interest rates, and otherdeterminants of profitability for various racial and ethnic groups are notmeasured. (1994, April). Fixed-rate mortgage originations have been hit hardestby these actions. Smith, M. 1% 1983 12.17% 11. 55). San Antonio had the highestdefault rate on 3 -year fixed mortgages in the 1988-1992 period. "While the number of MMIF 3 -year, fixed-rate mortgagesoriginated annually remained in a narrow range--from 528, to 64 , -during origination years 1988-1993, the number of reported nonrefinancingsdeclined sharply from a peak of 627,165 mortgages in 199 to only 338, 1mortgages in 1993. 1991 - 1.6 percent. Table 1 Mortgage Rate Changes [3 -year fixed Rate]For Selected Cities __________________________________________________________ City Rate Change Atlanta - .23% Baltimore - .25% Charlotte - .22% Chicago - .17% Cleveland - .21% Dallas - .2 % Denver - .21% Detroit - .17% Los Angeles - .24% Miami - .16% Minneapolis - .27% New York - .16% Phoenix - .21% San Francisco - .17% Seattle - .44% St. Lenders,however, offered larger initial-rate discounts on ARMs to stimulate demand. R. At the same time, the number of reported refinancingsrose from around 12, in both 1989 and 199 to more than 236, in 1993. (1995, February). 1991 - 1.11 percent. "An increase in short-term rates is expected to dampen borrower demandfor adjustable-rate mortgages as the spread between initial interest rateson ARMs and fixed interest rates on 3 -year mortgages narrows. The average for the 3 -year fixed-rate mortgageexperienced the largest rate decrease (Ratner, 1995, p. 43). 69.6 67.3 Joint (white/ 74.1 78.2 77.6 79.2 minority) [Source: Canner, Smith, Bowen, Benkovic, Freeland, Johnson,Orndorff, and Schultz, p. Hispanic 54. N. (1991). The lower approval rates for blackapplicants are even more pronounced in relation to conventional mortgagesthan in relation to government-backed mortgages. Levy, J. 199 - .97 percent. 3 percent. 76.8 minority) [Source: Canner and Smith, p. REAL ESTATE LOANS AND INTEREST Introduction This research examines the mortgage loan market. M., Freeland,S. 1 Hispanic 65.1 21.4 12.4 1.1 1 White 75.5 14.4 9.4 .7 1 Other 68.2 19. 5 -57). 11. Federal ReserveBulletin, 81(2), 71-1 2. As the data presented in the table indicate, rates for 3 -year fixed-rate mortgages declined in each of the 17 cities. 5 -57). MortgageBanking, 54(7), 1 4-114. Schiller, Z. The most recent economicrecession in the United States began in 199 and became more entrenched in1991. Interest Rate Comparisons in Relation to Selected Loan-Type Alternatives In 1994, the Federal Reserve Board raised interest rates six times(Leigh, pp. Leigh, G. The rapid advance in home sales in thesecond half of 1993 was visible evidence of the enormous potential formortgage originations from this unsatisfied demand" (Kidd, 1994, pp. Mortgage loan accessibility for low-income persons is tied closely to discrimination in mortgage lending. Table 2 Interest Rate Comparison: 1981-1993 __________________________________________________________ Year 3 -Year Fixed Adjustable 15-Year Fixed 1981 14.17% 14.83% 1982 14.21% 12. 64.9 67. E. Table 3 Disposition of Home Loan Applications by Racial and Ethnic Background:Government-Backed Mortgages 199 __________________________________________________________ Racial/Ethnic Group Disposition of Applications (%) Approved Denied Withdrawn File Closed Total American Indian/ 63.5 22.5 12.8 1.2 1 AlaskanNative Asian/Pacific 74.8 12.8 11.6 .8 1 Islander Black 6 .9 26.3 11.3 1.5 1 Hispanic 68.7 18.4 11.6 1.3 1 White 77.4 12.1 9.7 .8 1 Other 66.3 18.4 13.8 1.5 1 Joint (white/ 75.6 14.1 9.5 .8 1 minority) [Source: Canner, Smith, Bowen, Benkovic, Freeland, Johnson,Orndorff, and Schultz, p. 65). Commercial mortgagerates in the nine-percent range, however, continue to be "viewed asattractive by most seasoned borrowers" (p. B., Smith, D. 872] Table 6 Home Loan Approvals by Racial and Ethnic Background, and ApplicantIncome: Conventional Mortgages 199 __________________________________________________________ Racial/Ethnic Group Mortgage Loan Approvals (%) -------------------------------------------- Income As A Percent of Metro Area Average -------------------------------------------- Less Than 8 % 8 -99% 1 -12 % More Than 12 % ------------- ------------- ------ -------- -------------- American Indian/ 62.7 73.3 72.6 74.4 AlaskanNative Asian/Pacific 68.4 75.1 75. Payment-capped ARMs limit the level of monthly mortgagepayments (Cotton, p. Since 1988, 15-year fixed-rate mortgages have been most popular forthe purposes of refinancing (Herzog, 1995, pp. In the contemporary market, lenders havedeveloped and offer several ARM variations--a variety of indexes, margins,caps, reset periods and conversion options. The outlook for low-income mortgage accessibility is not promising(Canner & Passmore, 1995, pp. 1 ), Nobel Prizewinning economist Gary Becker (1993, p. 68.5 White 61.7 77. Although the existence of statistical disparities between whites andminorities in the extension home mortgage loans is acknowledged by allparties, disagreement exists as to the reasons for these disparities.Equal opportunity activists contend that racial discrimination by mortgagelending institutions "is a contributing, if not the primary, source ofthese patterns" (Canner, Smith, Bowen, Benkovic, Freeland, Johnson,Orndorff, & Schultz, p. The data presented in both Tables 3 and 4 reflect higher approvalrates for whites and Asian/Pacific Islanders than for other racial andethnic groups, and substantially lower approval rates for blacks than forany other racial or ethnic group. 1989 - 18.75 percent. Mortgage Banking,55(8), 38-43. Spotting shifts in markets. 99-1 ; Schiller, 1993, p. Therefore, one would anticipate lower home loan approval rates in1991 than in 199 . Canner, G. 8 8] _________________________________________________________Table 8 Disposition of Home Loan Applications by Racial and Ethnic Background: Conventional Mortgages 1991 __________________________________________________________ Racial/Ethnic Group Disposition of Applications (%) ------------------------------------------- Approved Denied Withdrawn File Closed Total ----------- -------- ------ --------- ----------- ----- American Indian/ 62.4 27.3 8.8 1.5 1 AlaskanNative Asian/Pacific 72.6 15. Islanderblack 58.5 64.5 65.7 68. 18) bases his contention on his theory of discrimination in the marketplace. 1991 - .18 percent. The datapresented in Tables 3 and 4 summarize the disposition of home loanapplications by racial and ethnic group for government-backed mortgages(Table 3) and conventional mortgages (Table 4). Hispanic 66.5 72.2 73.9 72.4 White 76.5 81. Balloon-payment mortgages are available for five,seven, and 1 -year periods. ARMs account for 43-percent of all home-purchase first mortgages inthe contemporary period, and at the end of 1994 accounted for 28 percent ofall real estate mortgages in lender portfolios (Leigh, 1995, pp. 47). During the early 199 s, low fixed-rate interest, 3 -year mortgageswere the overwhelming choice of borrowers; however, in 1995, ARMs areexpected "to comprise about 4 percent of the market, falling from anexpected high of 52 percent of originations in the first quarter, to about4 percent in the second quarter, and continuing to decline through the endof the year. FederalReserve Bulletin, 77(11), 859-881. 79.9 81. Many borrowers select a 15-year term mortgage in order to takeadvantage of lower interest rates on these shorter-term mortgages, and topay off their mortgage before they retire or their children enter college(Herzog, pp. ARMs also are available thatoffer deeper-discounted interest rates "in exchange for a penalty if theloan is paid off early" (p. 1.7 1 White 74.3 16.3 8.3 1.1 1 Other 68.7 16.3 12.6 2.4 1 Joint(white/ 74. Default rates for 15-year fixed rate mortgages also declined from 1988through 1992, and were much lower than the default rates for 3 -year fixedrate mortgages (Herzog, p. 1992 - .17 percent. S. 5% 1992 8.4 % 6.3 % 8. Current and Projected Mortgage Loan Market Environments The issuance "of mortgages for home purchase will explode in the nextfew years. Kidd, P. (1993). 15.9 9.1 1. Home Loan Approvals by Racial and Ethnic Background, and Applicant Income: Government-Backed Mortgages 1991 __________________________________________________________ Racial/Ethnic Group Mortgage Loan Approvals (%) -------------------------------------------- Income As A Percent of Metro Area Average -------------------------------------------- Less Than 8 % 8 -99% 1 -12 % More Than 12 % ----------- ------------- ------ -------- -------------- American Indian/ 61. The index represents the average cost ofborrowing for member institutions of the District. 71.3 AlaskanNative Asian/Pacific 75. 65;Foust, p. 199 - 7.69 percent. 1 4-1 5). Monthly payment level caps are revisedonce every five years or at any time that "the loan amount reaches 125percent of the amount of the original mortgage" (p. 14] Interest rates on 3 -year, fixed-rate mortgages had risen two fullpercentage points in the first-half of 1994 (Cotton, pp. ., orit could be the result of falling interest rates that prompted borrowers torefinance" (p. This could be a result of more accurate coding of refinancings . 1992 - .19 percent. Although the difference in ratesnarrowed to 6.37 percent for ARMs and 8.38 percent for fixed-rate mortgagesby the end of March, the 2.48-point spread between the initial rate for one-year ARMs and for 3 -year, fixed-rate mortgages illustrates the lure of theadjustable-rate product" (Cotton, p. During late-Mayand June, however, mortgage rates have declined from the nine-percent highreached earlier in 1995. The most widely used payment-capped ARMs aretied to the Cost-of-Funds Index (COFI) of the Eleventh District of theFederal Home Loan Bank System. B., & Passmore, W. S., Bowen, N. Joint (white/ 64.8 72.2 75.8 77.6 minority) [Source: Canner, Smith, Bowen, Benkovic, Freeland, Johnson,Orndorff, and Schultz, p. 5 -57). 9% 1993 7.79% 5.84% 7.45% [source: Herzog, p. 87 ] __________________________________________________________ Data for 1991 are summarized in Tables 7 through 1 . 18) also points out that minority-owned banksand other institutions specializing in loans to minority groups "have nottended to be particularly profitable," and that this fact tends to supportthe contention that factors affecting profitability, rather than racialdiscrimination explain differences among minority groups in relation tohome loan approval rates. Again, thesepatterns are even more pronounced in relation to conventional mortgagesthan in relation to government-backed mortgages. The high default rate on ARMs suggeststhat these are the loans of choice for more financially distressed" homebuyers (p. 81.8 Other 68.9 69.4 75.9 73.2 Joint (white/ 67.1 76.4 79.1 79.2 minority) [Source: Canner and Smith, p. A., Johnson, C. (1994, 24 May).American Banker, 159(99), 8. 8% 1984 12.87% 12.39% 12.13% 1985 11.88% 9.64% 11.41% 1986 9.79% 8.84% 9.59% 1987 9.35% 8.19% 9. Generally, as was true in 199 , thedata reflect rising approval rates for all racial and ethnic groups asapplicant income rises, with some exceptions at the highest income level.Regardless of income level, however, whites and Asians/Pacific Islanderscontinued to be approved more frequently than are other racial and ethnicgroups, and blacks are approved less frequently than any other racial orethnic group. 17). (1992). Interest rate comparisons for 15-year fixed ratemortgages, 3 -year fixed rate mortgages, and ARMs for the period 1981through 1993 are presented in Table 2, which may be found beginning belowon this page. Other 63. 4-8). 87 ] The data presented in Tables 5 and 6 summarize the approval rates forhome loan applicants when controlled for both racial and ethnic group andfor applicant income for both government-backed mortgages (Table 5) andconventional mortgages (Table 6). Accessibility tomortgage loans for low-income persons likely will continue to beproblematical. Flexiblemortgage products that meet the needs of borrowers, particularly first-timehomebuyers, will continue to offer competitive advantages to lenders whoare positioned for growth in this challenging marketplace" (Cotton, p. Analyses of data for 1987 found that mortgage lending institutions inboth Atlanta and Detroit "extended roughly three to four times more homepurchase loans per single family housing unit in the predominantly whiteneighborhoods than in the predominantly minority areas" (Canner, Smith,Bowen, Benkovic, Freeland, Johnson, Orndorff, & Schultz, 1991, p. Foust, D. 54). (1993). Managing real estate portfoliosafter the boom. (1995, February). Default rates were as follows: 1988 - 7.69 percent. Flexibility maybe structured into ARMs with rate-caps and payment-caps, "loans thateliminate closing costs paid by the borrower and mortgages with indexesthat lag the more traditional Treasury index" (p. 14). 1 AlaskanNative Asian/Pacific 72.7 12.9 13.5 .9 1 Islander Black 55.7 33.9 9.4 1. Ratner, J. With the LIBOR index, borrowers also can avoid extreme paymentfluctuations since interest rate adjustments typically are capped at one-percent every six months" (Cotton, p. HomeMortgage Disclosure Act: Expanded data on residential lending. Among lenders surveyed for Freddie Mac'sPrimary Mortgage Market Survey last December, the average one-year ARMinterest rate for that month was 6.71 percent, compared with 9.19 percentfor 3 -year fixed-rate mortgages. ARMs are especially attractive to borrowers "seeking low initialmortgage payments" (p. Phoenix had the highest default rate for 15-year fixed rate mortgagesin the 1988-1992 period (Herzog, pp. Federal Reserve Bulletin, 78(11), 8 1-825. Canner, G. Becker(p. 69.7 7 .1 7 .4 Joint (white/ 59.2 72.9 75. 16-17). Minority lending: BANC One gets a move on.Business Week, (3315), 1 . InCalifornia in 1994, for the first time since 1989, ARMs accounted for morethan one-half of all new residential mortgages (California, 1994, p. BusinessWeek, (3315), 99-1 . Regardless of incomelevel, however, whites and Asians/Pacific Islanders are approved morefrequently than are other racial and ethnic groups, and blacks are approvedless frequently than any other racial or ethnic group. A variation on this concept is theelimination of borrower closing costs as opposed to a deeper-discountedinterest rate. References Becker, G. 864).Similar analyses conducted a year later produced similar results forChicago, Denver, Louisville, Minneapolis, and Washington. 1.1 1 Hispanic 61.5 26.6 1 .3 1.6 1 White 73.7 17.3 8.2 .8 1 Other 67.2 19.9 11.5 1.4 1 Joint (white/ 71.9 17.5 9.8 .8 1 minority) [Source: Canner and Smith, p. . "I want to be the banks' worst nightmare." BusinessWeek, (33 3), 65. Default rates for ARMs were higher than those for 15-year fixed ratemortgages, and generally were higher than the default rates for 3 -yearfixed rate mortgages (Herzog, p. However, when the interest ratejumps up quickly to the fully indexed rate, the borrower's monthly paymentis typically not enough to cover the monthly interest expense. In relation to government-backed mortgages, however, approvalrates were lower for white applicants but higher for minority applicants. 52). Thus, the demand for ARMs began to grow. National Real EstateInvestor, 36(5), 16-17. (1993). S. Home purchase lendingin low-income neighborhoods and to low-income borrowers. The COFI "isattractive to borrowers in a rising interest rate environment since theindex lags some other common indexes. (1994,May). 48). Fixed-rate mortgages are available for 1 , 15, 2 , and 3 -year periods(Leigh, 1995, pp. (1995, January-February). This prediction was made in May 1995; however, changes in the generaleconomy reported in June 1995 cast doubt on the accuracy of the prediction,and interest rates are expected to either stabilize or fall over theremaining months of 1995. During the first-half of1994, however, short-term interest rates, including the rates most oftenused as ARM indexes, rose nearly as much as long-term rates. This theory demands that discriminators sacrifice profits in orderto discriminate against a particular population group. Rate changesfor 17 cities are summarized in Table 1, which may be found on thefollowing page. This outcome prevailed in relation to conventionalmortgages. The Treasury-indexed ARMs remain popular, however, borrowers also mayopt for ARMs that offer "stable monthly payments for five, seven or 1 years and fixed-rate conversion options" (Cotton, p. A., & Schultz, M. Rising rates still attractive to most borrowers. Canner, G. Discrimination in the extension of mortgage credit is volatile issuein the United States (Smith, 1993, p. Periodic adjustments tothe mortgage's interest rate are not capped, however, payments adjustmentsare limited to an annual increase or decrease to 7.5 percent. 71-1 2). 3% 1988 1 .11% 8.86% 9.8 % 1989 9.94% 9. 18) does not think that the datanecessarily provide evidence of discrimination in mortgage lending. 8 8] __________________________________________________________ While equal opportunity activists and some analysts see the specter ofracial discrimination behind these mortgage lending patterns (Smith, p. H., Orndorff, T. 68.5 71.2 69.8 AlaskanNative Asian/Pacific 72.3 78.8 78.7 78.3 Islander Black 58.8 66.8 66.9 69.3 Hispanic 64.6 7 .8 71.2 75.7 White 67.3 79.5 81. The Mortgage Bankers Association predicts that mortgageinterest rates will rise to 1 -percent by November 1995. 78.1 8 .4 81.2 Other 64.5 7 .6 72.1 71. Armed for competition. 864). 81.9 82.4 Other 67.7 72. By midyear 1994, "ARMs had almost a 3-point interest rate advantageover fixed-rate mortgages. The datapresented in Tables 7 and 8 summarize the disposition of home loanapplications by racial and ethnic group for government-backed mortgages(Table 7) and conventional mortgages (Table 8). (1992). The evidence against banks doesn't prove bias.Business Week, (3315), 18. 812] _________________________________________________________Table 1 Home Loan Approvals by Racial and Ethnic Background, and ApplicantIncome: Conventional Mortgages 1991 __________________________________________________________ Racial/Ethnic Group Mortgage Loan Approvals (%) -------------------------------------------- Income As A Percent of Metro Area Average -------------------------------------------- Less Than 8 % 8 -99% 1 -12 % More Than 12 % ----------- ------------- ------ -------- -------------- American Indian/ 53.9 69.4 73.9 73.4 AlaskanNative Asian/Pacific 68.5 75.18 75.5 74.3 Islander Black 44.9 6 .7 63.9 66. 45). The data presented in Tables 9 and 1 summarize the approval rates forhome loan applicants when controlled for both racial and ethnic group andfor applicant income for both government-backed mortgages (Table 9) andconventional mortgages (Table 1 ). The study of mortgage lending in theBoston metropolitan area conducted by the Federal Reserve Bank of Bostonwhere default rates were collected, however, found no difference in defaultrates between whites and minority applicants approved for home loans.Thus, mortgage lenders in the Boston area do not appear to be seeking onlythe most credit worthy minority applicants, while accepting less qualifiedwhite applicants. Six-month LIBOR ARMs frequentlyoffer lower initial interest rates, life caps and margins than other ARMproducts. Another popular variation of the ARM is "the semiannual rate-cappedLondon Interbank Offered Rate (LIBOR) ARM. 1989 - 1.59 percent. California sees surge in adjustable-rate home loans. 4% 9.85% 199 9.76% 8.46% 9.63% 1991 9.27% 7.13% 9. 46). (1995, May). 4-8). 11.9 .9 1 Joint (white/ 78.3 14.9 11.1 .7 1 minority) [Source: Canner, Smith, Bowen, Benkovic, Freeland, Johnson,Orndorff, and Schultz, p. 54] __________________________________________________________ 1988 - 1 .12 percent. Herzog, T. 4-8). Home loan rates fall despite Fed hike,with 3 -year fixed dropping the most. (1993). Expanded HMDA data onresidential lending: One year later. 78.4 78.1 76. Data for 199 are summarized in Tables 3 through 6. All Texascities had high default rates on 3 -year fixed rate mortgages in the 1988-1992 period. 864). 45). "No credit doesn't necessarily mean bad credit."Business Week, (3292), 43. B., & Smith, D. 1989 - 5.73 percent. By contrast, commercial mortgage interest rates have been quite highfor a long period of time (Levy, 1994, pp. Becker (p. The default rate of15-year fixed rate mortgages is far lower than that for either 3 -yearfixed rate mortgages or for ARMs. Louis - .2 % Washington - .28% [source: Ratner, p. Interest rate capsimpose periodic and lifetime ceilings on the underlying mortgage's noterate. E., Benkovic, F. 872] The home loan approval patterns in 1991, however, remained similar tothose for 199 . 199 - 3.42 percent. 8). Again, these patterns are even more pronounced in relationto conventional mortgages than in relation to government-backed mortgages.Again, following the patterns of 199 , approval rates tend to rise morerapidly from the lowest income group to the higher income groups for otherracial and ethnic groups than is true for black applicants.Disposition of Home Loan Applications by Racial and Ethnic Background: Government-Backed Mortgages 1991 __________________________________________________________ Racial/Ethnic Group Disposition of Applications (%) ------------------------------------------- Approved Denied Withdrawn File Closed Total ------------ -------- ------ --------- ----------- ----- American Indian/ 64.2 22.1 12.1 1.6 1 AlaskanNative Asian/Pacific 74.9 12.5 11.4 1.2 1 Islander Black 61.4 26.4 1 .3 1.9 1 Hispanic 68.4 18.9 11. Default rates were as follows: 1988 - 2.22 percent. Taking a sharper look at bank examiners. 49). 55). Generally, the data reflect risingapproval rates for all racial and ethnic groups as applicant income rises,with some exceptions at the highest income level. Comparison of Loan-Type Alternatives Available in the Contemporary Market Adjustable rate mortgages (ARMs) are one of the most popular loan-types available in the contemporary mortgage loan market (Cotton, 1995, pp.38-43). B. 43; Foust, 1993, pp. 47). 38-43).Consequently, may potential buyers could no longer qualify for a mortgageloan. Such caps limit interest rate hikes in each adjustment period to nomore than a specified percentage (usually no more than two), with aspecified lifetime cap of above the initial start rate (typically sixpercent). Other parties "suggest that the patternsreflect fundamental differences in the economic circumstances of populationgroups" (p. Although federal governmentefforts to end such discrimination have been pursued for two decades,critics contend that much work is still required (Foust, 1992, p. 48). Approval rates tend torise more rapidly from the lowest income group to the higher income groupsfor other racial and ethnic groups than is true for black applicants.Table 4 Disposition of Home Loan Applications by Racial and Ethnic Background: Conventional Mortgages 199 __________________________________________________________ Racial/Ethnic Group Disposition of Applications (%) ------------------------------------------- Approved Denied Withdrawn File Closed Total ----------- -------- ------ --------- ----------- ----- American Indian/ 66. Driving this phenomenal rise in loans for acquisition will bethe huge number of younger boomers (under 35-years-old) who were priced outof the market during the 198 s. 1 minority) [Source: Canner and Smith, p. Whites and Asians/Pacific Islanders were approved morefrequently than other racial and ethnic groups, while blacks were approvedless frequently. A white paper on FHA refinancings.Mortgage Banking, 55(5), 5 -57). Bi-weekly payment options also are availablein the contemporary market. 47). In thisscenario, the shortfall between the required interest payment and themonthly mortgage payment is added back into the loan balance in the form ofnegative amortization" (p. 812] __________________________________________________________ Summary and Conclusion The mortgage loan market is very much the captive of a Federal ReserveBoard that appears to be much more interested in providing security for thesecurity markets and financial growth for commercial banking institutionsthan in creating stability in the construction industry. 1992 - . 22.4 1 .6 1. 1.4 1 Islander Black 53.3 37.6 8. 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