Understanding the Unequal Costs of Native American Homeownership

Abstract

While there is an extensive literature on racial disparities in mortgage lending, Native American borrowers are often excluded from these studies. Using confidential Home Mortgage Disclosure Act data from 2018 to 2021, we examine differences in home loan prices between White and Native American borrowers, located on and off federally recognized reservations. We find significant disparities in loan prices between White and Native American borrowers, regardless of reservation status. When we incorporate newly available applicant characteristics—such as credit scores and property values—we discover that these factors account for 67 percent of the price gap for off-reservation Native loans but only 16 percent for on-reservation Native loans. The remaining price disparities for both on- and off-reservation Native loans are driven by the higher use of home-only loans, which are loans not secured by land. The greater reliance on home-only loans by Native borrowers cannot be explained by differences in property rights: in fact, Native landowners are more likely to use a home-only loan to purchase a manufactured home than comparable White landowners. Other explanations for the disproportionate use of home-only loans, such as racial disparities in mortgage approvals, proximity to a manufactured home dealership, faster home-only loan processing times, and differing degrees of trust in banks, are also ruled out.