Study finds mortgage discrimination
The Durham, NC based Center for Responsible Lending has released a new study showing widespread discrimination against Blacks and Hispanics in the mortgage lending industry:
African-Americans and Latinos get high-priced subprime mortgages far more frequently than whites -- even when they are equally qualified, according to a groundbreaking new study from CRL.The full report, "Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages", is here (PDF format). This Charlotte Observer article highlights some of the issues:
Lenders say they charge more because African-Americans and Latinos on average have shakier credit histories, which makes lending to them riskier. But that explanation is simply wrong.
In the most extensive study of its kind, CRL found that African-Americans and Latinos are commonly almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. The study examined 50,000 subprime loans. A House subcommittee is now discussing whether to pass a weak bill favored by industry or strong protections that would stop predatory lending practices like this in the vast sub-prime mortgage market, where people with blemished credit borrow and most mortgage abuses occur.
Two Americans, one black and one white, apply for similar mortgage loans. They have similar incomes, similar credit scores. They intend to make similar down payments.Predatory lending is a problem for all working Americans and especially the working poor. Unfortunately, as this report shows, minorities are far more likely to fall prey. Something to keep in mind the next time a "values conservative" tells you we're all on a level playing field and racial discrimination is a thing of the past.
They would seem to be candidates for similar interest rates. But a national study released Wednesday concludes the black borrower is more likely to be charged a high rate.
A Hispanic borrower also was more likely than a comparable white to pay a high rate, the study found.
Consumer groups said the study by the Center for Responsible Lending offered the clearest evidence to date that minorities can face widespread discrimination when they shop for mortgage loans.
[..]
The study by CRL, a Durham nonprofit that critiques the lending industry, is the latest effort to explain a new fact: Data released by lenders for the first time last year show minorities are more likely to pay high rates for mortgage loans.
Such loans require borrowers to pay tens of thousands of dollars in additional interest while building less equity. Borrowers fail to repay these loans far more often, losing their homes and ruining their credit. Foreclosures also damage neighborhoods.
The Observer reported in August that African Americans who borrowed from 25 of the nation's largest lenders were four times more likely than whites to pay high rates. Even blacks with incomes above $100,000 a year were charged high rates more often than whites with incomes below $40,000, the report found.
2 Comments:
Sorry Bud, but I've been in the mortgage business for 25 years in all sorts of sales positions and levels in 7 states. Never have I seen anyone discriminate. If a customer gets a sub-prime loan it's because his credit, downpayment or employment sucks. Period. We work on comission. The customer's info gets put into a software and it decides the acceptabilty. If it is not suitable for a conforming loan at least the custonmer can get a loan through the sup-prime market(before sub-prime he was out of luck-NO LOAN). It has NOTHING to do with whether they are black, brown, green, red, white or blue. This whole thing is nothing but attorneys making a paycheck. Period.
GreggS.
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