Consumers in the southern region of the country face greater difficulties in obtaining credit and pay higher interest rates than in other regions. consumer financial protection bureau (CFPB). This also applies to mortgage financing, with Southern residents applying for mortgage loans at the same rates as the rest of the country.
Thank you for reading this post, don't forget to subscribe!In the report “Consumer Finances in Rural Areas of the Southern Region,” the CFPB compares consumer financial experiences and outcomes in rural communities in the Southern Region to other regions. In the report “Banking and Credit Access in the US South,” the data focused on banking and credit access, and mortgage lending specifically, for both rural and non-rural areas of the region.
Key mortgage findings in the second report highlight the tough road ahead for mortgage financing for Southern consumers.
“While Southern rural consumers apply for mortgages at a similar rate to consumers nationwide (19 per 1,000 residents), they are more likely to have their applications denied (27% of mortgages in the rural South compared to 11% nationally) applications are denied),” the CFPB report says. “Additionally, rural Southerners seeking credit pay an average higher interest rate of 3.51%, compared to 3.13% nationally.”
The report also states that credit score alone cannot account for differences between regions. Both race and rural area of residence appear to be overweight in terms of consumer access to credit.
The report states, “People of color are more likely to be denied credit than similarly situated white borrowers, and rural Southerners are denied at higher rates than their non-rural counterparts ” “These trends held true among applicants with low and high credit scores.”
While there have been some recent gains in terms of “unbanked” consumers in the Southern region, rates remain high in some states.
“Two of the region’s states, Mississippi and Louisiana, have the highest unbanked rates in the nation at 11.1% and 8.1%, respectively,” the report said. “The highest unbanked rates in the region are in rural communities and communities of color; For example, in Mississippi and Georgia, the rural unbanked rate is nearly double the unbanked rate in metropolitan areas.”
There are also challenges with auto lending for Southern residents, as delinquency rates related to auto loan borrowers in the region are higher than for rural borrowers in other regions.
“In the rural southern [persistent poverty counties]”20% of consumers are delinquent on auto loans,” the CFPB said in the report. “Rural Southerners rely heavily on personal vehicles for transportation due to long commute times and a lack of alternative transit infrastructure and therefore may be particularly affected by the difficulty in obtaining auto loans.”
“The rural South faces different challenges when it comes to proper access to banking,” said Rohit Chopra, director of the CFPB. “Understanding regional differences across the country will help us determine where financial markets can work better for everyone.”
Still, the reports show signs of progress in some areas, particularly in terms of mortgage access and rates of unbanked consumers.
“Some mortgage lenders have a strong track record of reaching historically underserved markets within this region, such as rural communities, low-income borrowers and borrowers of color,” the report said. “Government loan programs and lenders’ access to the secondary market can also play an important role in increasing credit access in under-served communities.”
