Home purchase loans in Maine dropped 44 percent between 2006 and 2010 as the housing crisis unfolded, reflecting the regional trend, according to a new report put out Monday by the Federal Reserve Bank of Boston.
According to the report, the New England average decline was 44 percent, with a high of 50 percent in Connecticut and a low of 38 percent in Massachusetts. Nationwide, the Boston Fed notes, home-purchase loans in 2010 (2,200,000 mortgages) totaled only half the number of loans issued in 2006.
Home-Purchase Loans Percentage Change from 2006 to 2010
|All New England||-44|
From 2009 to 2010, the Boston Fed reported, declines in refinance loans varied significantly across New England, ranging from a 7 percent drop in Massachusetts to a 31 percent decline in Vermont.
“House price drops, high unemployment rates, and tighter underwriting conditions may have been responsible for the weakened refinance activity in 2010,” the Boston Fed noted.
But, the report added, with the exception of Rhode Island all the New England states showed a larger number of refinance originations in 2010 than in 2006.
|Percentage Change in Refinance Loans from 2006 to 2010||FHFA House Price Change from Peak to Bottom|
|All New England||32||-17|
The authors explain:
Sharp declines in housing prices can in part explain Rhode Island’s lower refinancing levels. Housing prices in that state plummeted 23 percent from peak to bottom, the largest decline in New England. The more house prices fall, the larger the percentage of borrowers with negative home equity.5 Lower home equity limits refinancing options as borrowers would need to reduce a significant portion of their loan balances to access refinance loans . As Avery et al. (2010) note, the number of refinanced loans are generally lower for borrowers in states that experienced the sharpest price declines within each credit-score group.
The report also breaks down loans and rejections by ethnicity, for New England as a whole, though not on a state-by-state basis:
Despite the declines, disparities persist. Home-purchase denial rates among blacks and Latinos were 1.8 times higher than those for whites in 2010. Even within the same income range, blacks and Latinos experience much higher denial rates than whites and Asians. For example, black borrowers earning from $91,000 to $120,000 faced a denial rate that was two times higher than the denial rate for whites in that income bracket.