black…MYstory

I can remember, from many years back, the Congressional Black Caucus railing against subprime lending.  Back then, they called it by a more appropriate term, “predatory lending”.

What they were seeing was evidence, both anecdotal and empirical, that minority homebuyers, particularly Black and Latino homebuyers, were being steered toward these predatory loans, even while White borrowers in similar financial situations were being steered toward conventional loans.

A new report issued by the National Community Reinvestment Coalition (NCRC) sheds light on just how prevalent the racial disparities in these home loans really really are.

Below is a an excerpt of an article discussing this report:

According to the report, minorities are paying more for mortgages, even as their income levels increase. Loan price disparities, as compared to white counterparts, were more common for middle to upper-income (MUI) African-American and Hispanic borrowers than pricing disparities were for low- and moderate-income minority borrowers.

Lending disparities for African-Americans and Hispanics also increased significantly as income levels increased. During 2006, middle- and upper-income (MUI) African-Americans were twice or more as likely to receive high-cost loans as MUI whites in 155 of the metro areas analyzed (71.4 percent). Furthermore, MUI Hispanics were twice or more as likely to receive high-cost loans as MUI whites in 45 of the metro areas analyzed (22.5 percent).

In comparison, while low- and moderate-income (LMI) minorities are more likely to receive high-cost loans than LMI whites, the disparity was less significant than disparities among MUI borrowers. LMI African-Americans were twice or more as likely to receive high-cost loans as LMI whites in 87 metro areas (47.3 percent). Furthermore, LMI Hispanics were twice or more as likely to receive high-cost loans as LMI whites in 8 metro areas (4.9 percent).

Significant levels of high-cost lending unnecessarily impede wealth building in minority communities. High-cost loans have significantly contributed to the current foreclosure crisis, wiping out hundreds of millions of dollars in mortgage equity. The overwhelming and unexplained prevalence of high-cost lending in minority communities suggests that some level of discriminatory behavior continues in the mortgage finance market, as has been shown by other studies, including those utilizing creditworthiness data conducted by NCRC, the Center for Responsible Lending and the Federal Reserve.

The last paragraph is particularly telling.  It states that creditworthiness is not necessarily the determining factore in whether or not a minority borrower would get a more expensive/riskier loan.

Granted, the onus is on us to become more financially-literate but, by no means, does this excuse away discriminatory practices on the part of lenders.

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