By Daniel Brown, Christopher Lewis and John Vermillion
ABA DataBank
Today’s housing market is marked by constrained supply, high prices and high mortgage rates. This home affordability crisis disproportionately hurts those who have historically struggled to achieve homeownership. Despite these obstacles, lenders such as the 151 minority depository institutions, with an average of $917M in assets per institution, specialize in assisting their customers to achieve one of the central ideals of the American dream. This DataBank examines MDI mortgage lending in 2024 using the Home Mortgage Disclosure Act (HMDA) dataset.
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MDI mortgage originations
Despite low sales across the country in 2024, MDIs remained key mortgage lenders in their core markets. MDIs that filed 2024 HMDA data (those that originated more than 25 loans in each of the previous 2 calendar years) originated 34,724 mortgage loans worth a combined $13.3 billion. Figure 1 illustrates the geographic distribution of MDI mortgage originations.
Figure 1: MDI Mortgage Originations by State (2024)
Source: HMDA, ABA calculations.
While MDI mortgage lending was strongest in high-population states such as California, New York and Texas, MDIs also outperformed in Oklahoma (2,765 originations worth $678 million) and Massachusetts (5,774 originations worth $3.4 billion). In terms of what distinguishes Oklahoma MDIs, Haylie Calicott of First Security Bank and Trust explains: “Oklahoma community banks and MDIs are making sure they are making an outsized impact in their local markets. Whether it is community service events, financial literacy seminars, or community expositions, Oklahoma banks go above and beyond to make sure their customers know the importance of banking locally.”
While small dollar mortgage lending has generally declined over the past several years, HMDA data suggest MDIs continue to outpace other mortgage lenders at originating smaller-dollar mortgages. Figure 2 illustrates that while 30% of non-MDI mortgage loans in 2024 were for less than $250,000, 39% of MDI mortgage loans were for less than $250,000. This difference is even more significant in light of the recent increase in origination costs that disproportionately affects smaller lenders.
MDI mortgage originations to underserved communities
Although MDIs account for a relatively small share of total mortgage originations, as one might expect they direct a significantly higher proportion of their lending to minority applicants. The 2024 HMDA data show 26.6% of MDI-originated loans were made to minority borrowers, compared to just 18.6% across non-MDI lenders (Figure 3). This suggests that MDIs work to meet the needs of their customers, offering a disproportionately positive effect on minority access to homeownership and credit.
Source: HMDA, ABA calculations.
MDIs, FHA loans and first-time home buyers
MDIs originate various types of mortgages, and their distribution of loan types differs from other types of lenders. For example, while in 2024 roughly 15% of mortgages nationally were Federal Housing Administration loans, Figure 4 shows that a quarter of MDI originations in 2024 were FHA mortgages. Although some institutions have steered away from FHA loans due to regulatory and litigation risks associated with the program, FHA loans offer first time homebuyers and individuals with lower down payments and credit scores access to homeownership. Therefore, MDIs’ outsized presence in this program demonstrates their commitment to providing homeownership opportunities for those in their local communities.
Although saving enough for a down payment has become a significant barrier to home ownership, MDIs find ways to provide new homebuyers with additional capital to finance their first homes. For example, Citizens Bank and Trust Company, an MDI in Nashville, Tennessee, partners with The Housing Fund to provide additional funding for low-to-moderate-income homebuyers to purchase a home. As home prices and everyday expenses continue to rise, these programs are critical to help homebuyers who may not otherwise have an opportunity to buy a house to make their financial dreams a reality.
Conclusion
Despite the low volume of home sales in 2024, MDIs played an important role in originating mortgages for their customers in their local markets. MDIs also outperformed the overall industry in originating FHA loans. In an era of record low home affordability, MDIs are an important source of liquidity for Americans to achieve their financial goals.
Daniel Brown is senior director and economist at ABA. Christopher Lewis is VP for the office of strategic engagement at ABA. John Vermillion is an economic research associate at ABA.
