Tough Times for Chicago-Area Latinos Seeking Mortgages—and a New Video Feature for Answering Your Real-Estate Questions

Research by the Latino Policy Forum indicates that Chicago-area Latinos get rejected for conventional home loans at nearly twice the rate of the region’s general population. While about 15 percent of Chicago-area residents applying for a home loan were turned down, the forum’s research revealed that almost 30 percent of Latino applicants were denied…

Research by the Latino Policy Forum indicates that Chicago-area Latinos get rejected for conventional home loans at nearly twice the rate of the region’s general population. While about 15 percent of Chicago-area residents applying for a home loan were turned down, the forum’s research revealed that almost 30 percent of Latino applicants were denied.

“We know there’s a crisis of homeownership, in terms of it being difficult for anyone to buy a home,” says Sylvia Puente, the forum’s executive director. But the Latino rejection rate “poses a particular challenge to the future of the region’s housing economy, given that Latinos have been such a driver in the market over the past decade.”

Latinos have accounted for more than half the growth in owner-occupied housing units since 2000, says Juliana Gonzalez-Crussi, the forum’s policy and housing analyst. In the seven-county Chicago region—Cook, DuPage, Kane, Kendall, Lake, McHenry and Will—the number of Latino homeowners rose from 163,839 to 236,556 between 2000 and 2009, a 44 percent increase. “For better or for worse, Latinos benefited greatly from the loosening up in home-lending in the past decade,” Puente says. “It propelled Latino homeownership.”

Both Puente and Gonzalez-Crussi note that the high mortgage-rejection rate could tamp down demand for for-sale housing in a market struggling to recover. (Their data, from 2009, is the latest available.) A national study that came out in February showed that the total value of mortgages made to Latinos dropped from $214 million to $78 million between 2004 and 2009, a 63 percent decrease. Lending to African Americans dropped 60 percent; for whites, it dropped 17 percent. The total lent to Asians remained virtually unchanged.

Research from the National Association of Realtors (NAR) suggests that Latino homebuyers will take another hit if a federal proposal requiring a 20 percent down payment in order to buy a home gets approved.. Because Latino and African American homebuyers are more likely than other groups to rely on savings—as opposed to gifts, inheritances, or other investments—for down payments, the NAR says, insisting on a down payment of 20 percent will shut more of them out of homeownership.

With Chicago’s Latino population growing as the African American and white populations shrink, Puente says, it’s obvious that “if there are limitations on Latino homeownership, that impacts everyone in the [housing] market.”

Puente believes that a key reason Latinos are more frequently denied loans is their greater likelihood that extended families will buy a home together. “You have more people [in one household] on whom to verify income, so the arrangement undergoes more scrutiny,” she suggests. For instance, a lender might ding an application based on the fear that one of the household’s workers might lose his or her job. That’s not an unreasonable fear, given the large numbers of Latino workers employed in hard-hit industries such as construction and manufacturing, Puente says. This spring, the unemployment rate for Chicago Latinos was 13.3 percent, compared to 10.5 percent for the city overall.

“Traditionally for Latinos, owning a home was [their] pathway to achieving middle-class status and economic mobility and leveraging capital, because [they] didn’t have a history of investments in the market,” Puente says. With home equity greatly diminished by falling home values and Latinos’ increased difficulty in getting a mortgage, “that opportunity is greatly curtailed.” 

Also: We are getting ready to launch a new video series here where I will answer readers’ real-estate questions. So what would you like to know? Are you wondering how to find foreclosures that you can make livable? Are you a first-time buyer trying to figure out where you would like to live? Do you want some insight into a particular neighborhood or suburb? Ask me! (Just don’t ask me to recommend a specific property or real-estate agent; sorry, but I can’t help you there.) Send your questions to dennis@rodkin.com and check back in early fall for our first installment.

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