Posted on: Tuesday, April 12, 2005
Blacks tied to high-priced loans
By sue Kirchhoff
USA Today
WASHINGTON — African-Americans were nearly three times as likely as whites to take out higher-cost subprime mortgages in 2004, according to an analysis of 15 large lenders by a nonprofit group.
The National Community Reinvestment Coalition study, which covered about a quarter of mortgages that must be reported under federal law, also found female and lower-income borrowers were more apt to turn to subprime lenders. The subprime market provides higher-priced loans to consumers with blemished credit.
In general, 29 percent of mortgage loans to African-Americans were subprime, compared with 10 percent for whites, 15 percent for Hispanics and 4 percent for Asians.
Women received nearly 37 percent of subprime loans and 28 percent of prime loans. Low- and moderate-income borrowers got about 20 percent of loans from subprime lenders, compared with 10 percent for upper-income borrowers. Low-income was defined as up to 80 percent of the national median income of $43,500; moderate was 81 percent to 120 percent.
"Women, minorities and low- to moderate-income individuals should not have to pay more to participate in the American dream of homeownership," said John Taylor, president of the NCRC, which represents consumer and community-based development groups.
Industry officials, under fire from consumer groups, have been nervously awaiting the data, which started being released March 31.
"There is some disparity, but you don't really know why yet," said John Dalton, head of the Housing Policy Council of the Financial Services Roundtable, noting that the data don't include credit scores and other information used in determining loan prices. Noting the rise in minority homeownership in recent years, Dalton said, "I think (lending) is generally a good-news story in that credit is expanding."
The study is based on 2004 Home Mortgage Disclosure Act data. For the first time, lenders were required to include price information on more-expensive loans, based on annual percentage rates, as well as lending for manufactured housing, which can range from trailers to larger dwellings.
The data show a disparity in lending for manufactured homes, with 52.6 percent of African-Americans purchasing such homes getting subprime loans, compared with 33 percent to 34 percent for other racial groups.
The study, which looked at about 4.6 million prime and 649,000 subprime loans, did not show a wide price disparity within the subprime market. Under new rules, lenders must report the rate spread for an initial loan more than 3 percentage points above a Treasury security of a comparable term.
The median spread in the subprime market ranged from 3.26 percentage points for Asians to 3.46 percentage points for African-Americans.
NCRC staff said the main issue remains the fact that minorities and lower-income groups are more dependent on subprime financing.
The study looked at data from lenders including Ameriquest, Bank of America, Countrywide, Citigroup, SunTrust, U.S. Bank, Wachovia, Washington Mutual, J.P. Morgan Chase and Wells Fargo.
The Federal Reserve, which oversees HMDA, warned that data alone do not prove discrimination but are a tool for ferreting out possible cases of unfair lending.
