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Study: your color affects your mortgage rate

Thursday, June 01, 2006

Someone should email this bit of business to White House Spokesbot and race expert Tony Snow, who declared that "racism isn't that big a deal any more."

The Center for Responsible Lending , based here in Durham, a nonprofit, nonpartisan research and policy org which does great work to fight abusive financial practices that threaten homeownership and family wealth, just completed a study that reveals continued nationwide discrimination in mortgage lending experienced by blacks and Latinos. The information is contained in the report Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages (PDF).

What makes the situation egregious is that the study showed that credit scores were comparable in this cases (50,000 subprime loans were studied).
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.
This kind of predatory lending goes on all the time. The effect of this nonsense is that this places the same minorities at risk of defaulting on those loans, damaging the very credit score that will then be used against them in other aspects of their financial lives. From the CRL's release:
"When African-American and Latino families are steered into higher-cost loans, this path to security is made steeper," said Hilary Shelton, director of the Washington bureau of the NAACP, the lobbying and public policy branch of the civil rights group. "That means that it's even harder for families of color to build equity for their future; it's even harder to send their children to college; and it's even harder to build wealth for the next generation."
So, what do you think the government is doing about this -- and any guesses as to whether they are looking out for the little guy?
New York Attorney General Eliot Spitzer is trying to get banks in his state to disclose more about their lending practices, but the banks and even federal regulators are fighting him in court.

...And on Capitol Hill a House subcommittee is debating whether a bill should include weak provisions favored by industry or stronger protections for borrowers in the vast sub-prime mortgage market, where people with blemished credit borrow and most mortgage abuses occur. The lending industry is lobbying subcommittee members heavily.
Disgusting. But doesn't Tony know best? There's nothing to see here...move along.

Hat tip, R. Neal @ Facing South.