Minorities Pay More For Mortgages, Study Shows

Redlining is alive and well.

According to a study released on July 10, 2007 by the Washington-based National Community Reinvestment Coalition, higher income does not protect blacks and Hispanics from receiving mortgage loans with above-market rates. The study showed that in 2005, blacks in 171 metropolitan areas were at least twice as likely as whites to receive expensive loans.

The study was based on an analysis of nationwide mortgage data collected by the Federal Reserve for the most recent year available. The worst lending disparity? Charleston, S.C. And right behind Charleston came the Bridgeport-Norwalk-Stamford area of Connecticut.

So-called predatory lenders target poor, minority customers with high-interest loan offers. The federal government in recent years has weakened the ability of states to regulate lending and enact tough consumer protection laws.

These findings aren’t new, by the way. Nonprofits such as the Association of Community Organizations for Reform Now have in previous years commissioned studies with similar findings. However, Tuesday’s report, which analyzed 2.3 million high-cost loans in 380 metro areas, also concluded while the disparity among blacks and whites existed at all income levels, it was more severe at higher income levels, rather than lower ones.
The study found middle-class and upper income blacks in 167 metropolitan areas were at least twice as likely as whites with similar incomes to receive loans with high rates. By comparison, there were 70 metropolitan areas where low-income blacks faced a similar likelihood of receiving above-market rates. Low-income blacks in all areas were more likely to have pricey loans than whites with similar incomes.

The report uses the Federal Reserve’s definition of high-cost loans: mortgages whose rates are at least 3 percentage points above Treasury securities. That definition includes most subprime loans given to people with weak credit records.

The Mortgage Bankers Association criticized the report, saying it focuses on race instead of factors lenders consider when deciding whether to make loans, such as borrowers’ debt levels and the amount of money they can provide as a down payment.

Source: The Connecticut Post Online.