The number of mortgages issued in rural America increased for the fifth straight year in 2016, but the recent rate of growth lagged far behind growth in the metropolitan mortgage market.

From 2014 to 2016, mortgages in rural (nonmetropolitan) counties grew by 29 percent. In the same period, the number of mortgages issued in suburban and urban areas grew by 44 and 43 percent, respectively.

The data come from reports filed under the Home Mortgage Disclosure Act and were compiled and analyzed by the Housing Assistance Council (HAC),a Washington, D.C., nonprofit focused on rural housing.

The disparity between urban and rural loan originations is primarily from refinance loans, not mortgages for newly purchased homes, according to the report. Metropolitan areas saw a much greater increase in the number of refinancing mortgages. So, the lower growth rate for rural mortgage originations “may primarily reflect that rural markets are not as volatile as suburban/urban home markets,” the report said.

Fifty-five percent of rural lending in 2016 involved a first lien home purchase loan – “a dramatic change from 2012 and 2013 when two-thirds of all originations involved refinance,” according to the report.

HAC analyzed data collected from the approximately 16.3 million loan records filed by 6,762 banks and lending institutions in the United States. The data is reported as a requirement of the Home Mortgage Disclosure Act, a rule enacted by Congress in 1975 to document how, and to what extent, banks are lending in their communities. HAC reported that approximately 2 million, or 15 percent of mortgage loans, were made in rural communities.

Interactive: Home Mortgage Loans Per 1000 Homes

Click on counties to see the raw number of loans and the rate of loans per 1,000 in population. A larger interactive version of this map is also online (Map: Housing Assistance Council using data provided via the federal Home Mortgage Disclosure Act)

Banks hold the largest share of home purchase loans in rural communities. In urban and suburban communities, the largest share is held by mortgage finance companies. HAC attributed this difference to the fact that most small-asset lenders are headquartered in rural communities. Approximately 64 percent of all FDIC-insured lenders are headquartered in rural communities, and those lenders make up only 6% of lending assets.

Another key difference between rural and urban lending is the share of loans supported by government-backed guarantees and incentives. Conventional loans represented 63 percent of all rural home purchase lending, somewhat lower than the corresponding rates for suburban and urban home loans. While government-backed lending has been on a sharp decline since the Great Recession a decade ago, the U.S. Department of Agriculture Rural Development lending programs continue to originate between 9 and 12 percent of rural home loans per year.

Rural borrowers also are more likely to obtain loans with higher interest rates and less favorable terms, according to HAC. These “high-cost loans” represent 9% of all rural home purchase and refinance loans compared to 5 percent for suburban and urban activity.” HAC attributed this to a greater level of manufactured-housing lending in rural areas. Those loans made up 6% percent of rural loans compared to roughly 1 percent of suburban and urban originations. Over half of all manufactured home loans were high-cost, compared to only 5% of other loans.

Rural people of color face both high rates of denial and high-cost lending, according the HAC. Approximately 37 percent of rural African-American and 34 percent of rural American Indian and Alaska Native (“Native American”) applicants were denied mortgages. That’s higher than the denial rate of metropolitan members of those demographic groups and nearly twice the denial rates for all U.S. applicants. Nineteen percent of the loans made to rural African Americans were high-cost, compared to only 8.5% rural non-Hispanic white borrowers.

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