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Austin faces a growing crisis as home prices rise and rents squeeze the average working family. With roughly 2,000 newcomers arriving in Austin each month, average home prices rose to $163,400 in 1999 according to the Real Estate Center at Texas A&M. Rents in Austin are the third highest in the South after Washington D.C. and Miami. At the same time, two out of three private sector jobs created in Austin in the 1990s paid wages below the city's average, and a fifth of all jobs pay less than $7 per hour. These working people have a harder and harder time finding an affordable home here.

Consumers Union and the Austin Tenants' Council together studied home mortgage lending to determine if banks and thrifts subject to CRA are making loans in low income areas at the same level they make loans elsewhere in the city. CU/ATC also calculated denial rates for minority applicants, and looked at market growth among minority applicants in the home purchase, refinance and home improvement loan markets.

• While the overall number of original owner-occupied home purchase loans in 1998 increased more than 12% over 1996 levels, the number of home purchase loans reported to Black applicants fell during this period from 1095 in 1996 to 965 in 1998.
  
• Lenders offer most borrowers conventional loans, but approve a disproportionate number of FHA loans for minority borrowers. While only 21.5 percent of borrowers obtained FHA loans, 41.1 percent of Hispanic borrowers and 36.8 percent Black borrowers took FHA loans.
  
• Blacks and Hispanics were denied at twice the rate for a home purchase loan in the Austin-San Marcos MSA as Whites in 1998, and the disparity in denial patterns appears to be increasing for Black applicants.
  
• While lower income Black and Hispanic applicants were not denied a home purchase loan higher rates than lower income White applicants, higher income Blacks and Hispanics were denied at a much higher rate than higher income Whites over the three year period, with the largest disparity for the highest income Black applicants.
  
• The largest bank lenders-Norwest Mortgage (affiliate of Norwest Bank), Guaranty Federal FSB and Chase Manhattan Mortgage-in the Austin-San Marcos MSA did not have the same level of lending in minority or low income areas that they had in other parts of the city.
  
• In contrast, the large manufactured home lenders-Green Tree Financial, Oakwood, The CIT Group Sales/Finance, Bank of America FSB, and Associates Housing Finance-as well as subprime credit lenders like Mortgage Portfolio Services and United Companies Lending are over-represented in these areas. These lenders as a whole tend to offer credit at higher than standard rates.
  
• Among the most equitable lenders in the Austin-San Marcos MSA were Nationsbank, Countrywide Home Loans, and Irwin Mortgage.
  

• For Black applicants, refinancing loan and home improvement loan denial ratios also increased strongly as income level increased. The very highest income Hispanic refinancing applicants were denied at more than twice the rate of the highest income White applicants.
  
• Only Bank One Group (Bank One Texas NA and Banc One Mortgage) and NationsBank Group (Nationsbank NA and Nationsbanc Mortgage) made more than their citywide market share of loans to people in low income or minority census tracts.
  
• Guaranty Federal/Temple-Inland, Norwest and Chase were substantially underrepresented in these areas. In contrast, Norwest and Chase, both made more than their citywide market share of refinance loans in low minority or in high income census tracts.
  
• While the top ten refinance lenders to White borrowers in low income census tracts are "prime" mortgage lenders and bank lenders, four of the top ten refinance lenders to Black borrowers are "subprime" lenders that typically charge higher interest.
  

• In most cases, the CRA file did not provide enough information to determine a bank's level of involvement in the Austin community. The CRA statement, a narrative description by the bank of its community investments and lending programs, is no longer required by federal regulators and most bank files reviewed no longer contain this statement.
  
• Overall, the major depository lenders in the Austin area received "Outstanding" or "Satisfactory" ratings for Texas, but few of the lenders showed strong investment performance in the Austin area. Several lenders had large and ongoing projects in Houston or Dallas, while Frost emphasizes community development in its home town, San Antonio. Only Chase and Bank One report significant construction lending in support of low income developments here.
  

ATC/CU believe that Austin, with its growing divide between rich and poor and its rapidly escalating housing prices, should be a central focus for community development by depository institutions in the coming years.

Consumers Union's Southwest Regional Office

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