Community Dividend

Who's receiving mortgage loans in the Twin Cities?

Data collected under the Home Mortgage Disclosure Act reveal who is accessing mortgage loans in the Twin Cities metropolitan area.

Stephanie Omersa | Community Affairs Analyst
Mike Wold | Senior Consumer Affairs Examiner

Published March 1, 1999  | March 1999 issue


HMDA data provide insight into Twin Cities home purchase lending activity.

If you have tried recently to buy your first home, you have likely discovered something many would-be homebuyers quickly learn: owning a home may be the American dream, but figuring out how to pay for it can be a reality check. Either you get approved for the loan or you can't buy the house.

Community development professionals know that access to credit, particularly for home loans, is critical to building individual wealth and strong local communities. While not everyone can qualify for a loan, it is important to know if there are systemic differences in access to credit across racial/ethnic groups, income levels, and neighborhoods.

How can you find out if people in your community have access to home purchase, refinance and home improvement lending? One important source of information is the Home Mortgage Disclosure Act (HMDA), which provides the public with access to loan data that can be used to:

  • determine whether financial institutions are serving the housing needs of their communities;
  • assist public officials in distributing public-sector investments so as to attract private investments to areas where it is needed; and
  • identify possible discriminatory lending practices.

As part of the Twin Cities Profile (see our cover story), we examined HMDA data from 1994 to 1996 for 10 counties in the Minneapolis-St. Paul metropolitan statistical area (MSA). 1/ This article provides a brief glimpse of the 1997 data (the most recent available) by highlighting key trends in home purchase lending activity in the 10 Minnesota counties that comprise the Twin Cities MSA. It also provides a comparison between the home purchase loan activity in the Twin Cities market and the rest of the country.

Home purchase lending

How does access to home mortgage credit in the Twin Cities compare to the rest of the country?

To analyze this question, we looked at HMDA data on government-backed and conventional home purchase loans. 2/ Conventional loans accounted for about 74 percent of the total home purchase loans in the Twin Cities market in 1997. Therefore, we decided to focus our analysis on these loans.

What did we find? The HMDA data reveal that more Twin Cities metro area applicants of all racial/ethnic groups and income levels were approved for a home loan than applicants with similar racial/ethnic and income characteristics across the country.

Racial/ethnic group

In 1997, as in the past several years, denial rates for American Indian, black and Hispanic applicants in the metro area were substantially higher than for white applicants. However, denial rates for applicants from all racial/ethnic groups in the metro area were lower (in most cases, substantially lower) than rates for their counterparts in the rest of the country. See Figure 1 (1997 Conventional Home Purchase Loan Denial Rates).

Income level

Denial rates by income level follow a similar pattern in the metro area as in the rest of the country, but overall denial rates are substantially lower in the Twin Cities metro area. 3/ See Figure 2 (1997 Conventional Home Purchase Denial Rates).

Why the difference in denial rates?

The substantial difference in loan denial rates in the metro area and the rest of the country raises some interesting questions. Are loan applicants in the Twin Cities generally more creditworthy than people in other parts of the country? Do lenders serving the Twin Cities market have less stringent credit standards? Are Twin Cities residents with poor credit histories less likely to apply for home purchase loans, resulting in fewer denials?

HMDA does not provide direct answers to any of these questions. It does, however, allow us to examine some of the factors that affect loan denial rates. One of those factors is the share of applications made to different types of lenders.

In recent years, a growing portion of loan applications reported under HMDA has been filed with lenders that specialize in subprime and manufactured home (SMH) lending. These lenders, who generally target borrowers with less-than-perfect credit, deny a much higher percentage of applications. Nationally, the share of conventional home purchase applications made to these lenders increased from 15 percent in 1993 to 37.8 percent in 1997. 4/

One reason that denial rates for conventional home purchase loans were so much lower in the Twin Cities than in the rest of the country is that a relatively small percentage of applications was made to SMH lenders. Approximately 22 percent of conventional home purchase applications in the metro area were made to SMH lenders in 1997, compared to the national rate of nearly 39 percent of applications. 5/

In addition to making fewer applications to SMH lenders, those Twin Cities applicants who did apply for SMH credit were much less likely to be denied than their counterparts in the rest of the United States. See Figure 3 (1997 Conventional Loan Denial Rates, Subprime and Manufactured Home Lenders). 6/ The HMDA data do not provide information about why these rates were so much lower.

Here's another interesting observation from these data: SMH lenders denied only 19 percent of conventional loan applications from black applicants compared to 36 percent of applications from white applicants.

Want to learn more?

If the information presented in this article has piqued your interest, you may want to research lending activity in your community. Aggregate reports (for each MSA) and disclosure statements (for each institution) are now available on the Web. For more information, see the box below.

HMDA data are available

HMDA data are available at for the following metropolitan statistical areas (MSAs) in the Ninth District:

Billings, Mont.
Bismarck, N.D.
Eau Claire, Wis.
Grand Forks, N.D.-Minn.
Great Falls, Mont.
La Crosse, Wis.-Minn.
Minneapolis-St. Paul, Minn.-Wis.
Missoula, Mont.
  (beginning in 2000)
Rapid City, S.D.
Rochester, Minn.
Sioux Falls, S.D.
St. Cloud, Minn.


1/ The counties included in the analysis are those defined as the 11-county MSA by the 1990 U.S. Census minus St. Croix County in Wisconsin. These counties are Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Washington and Wright.

2/ Government-backed loans are made by the Federal Housing Administration, Veterans Administration, and Farm Service Agency/Rural Housing Service.

3/ Income categories, as defined under HMDA, are based on percentage of HUD-adjusted median family income for the MSA. Categories are low (less than 50 percent of median family income), moderate (50-79 percent), middle 1 (80-99 percent), middle 2 (100-119 percent) and upper (120+ percent) income.

4/ FFIEC Press Release, August 6, 1998, Table 4.

5/ The percentage of all conventional loan applications to SMH lenders in the metro area is an estimate based on the number of loans made by the top 10 SMH lenders based on application activity. These lenders accounted for approximately 75 percent of total applications in the metro area.

6/ Estimate based on top 10 SMH lenders accounting for 75 percent of total applications in the metro area.