Housing Comes First

Blacks Get More High Cost Loans--No Racism?

According to a report released by the Federal Reserve, minority families often pay more for their home mortgages than white families.


As stated in an article in the Washington Post: "Blacks and Hispanics are getting a disproportionate share of high-cost mortgages compared with whites, according to new federal figures released yesterday. The analysis of 2004 home-lending data shows that even after adjusting for factors such as income level, loan size and property location that could raise the interest rate offered on a mortgage, blacks are still nearly twice as likely as whites to be given a high-cost loan."

New regulations under the Home Mortgage Disclosure Act require banks to report on the cost of loans, as well as the race, income and outcome of the loan request. For years, community groups have suspected that minority families were steered into sub-prime loans, complete with higher interest rates, more fees and other costs.

The increase of sub-prime and predatory loans has devastated our communities, leading to a rash of foreclosures and vacant houses. How can these figures not point to racial steering? The data controls for income, location and loan amount. The only variable is race. Banks claim the variable is credit. This begs the question, blacks are twice as likely as whites (in all income groups) to have damaged credit?

The banks point to the fact that increased sub-prime lending expands mortgage availability to families with less than perfect credit. Activists point to studies like one completed in March for the State of Pennsylvania Banking Department that links the increase in foreclosures to the increase in predatory loans.

posted by Phil @ 11:09 AM