Home Lending Discrimination
There has
been a lot of news recently about lenders discriminating
against minorities when they go to take
out a mortgage.
Advocacy groups are claiming some lenders are hiking up
rates and taking advantage of African Americans, Hispanics
and Asians.
Two groups are now “dueling” over whether
or not these people are actually being discriminated against
in the mortgage
world.
According to the article, “Dueling views on home
lending discrimination,” by Brigitte Yuille from
Bankrate.com, the two companies giving different opinions
on the situation are a consumer advocacy group and a law
firm that represents mortgage brokers.
“A consumer advocacy group, after analyzing loan
information provided to the government, says there is
clear evidence of discrimination against black and Hispanic
borrowers. A law firm that represents mortgage
lenders, using much of the same data, says its study
proves that there is no evidence of discrimination in
lending. The lawyers call the consumer advocates' views
‘skewed,’ while the advocates think the lawyers'
findings are ‘limited.’”
The consumer advocacy group claiming that minorities are
discriminated against is called the Center for Responsible
Lending. The law firm is Traiger & Hinckley LLP.
They are both basing their arguments on data found in
a report from the Home Mortgage Disclosure Act.
One of the main topics in the arguments was the issue
of sub-prime loans. These types of loans are usually administered
to people with bad credit or low-income and have higher
interest rates than “normal” loans.
“A May report by the Center for Responsible Lending,
based in part on information from the Home Mortgage Disclosure
Act, said when it comes to most types of high-priced home
loans, usually called sub-prime loans, black and Hispanic
borrowers were more than 30 percent more likely to receive
expensive sub-prime home loans than their white peers
with similar finances.”
The article states that the reason for all this is because
brokers sometimes get incentives to take on sub-prime
loans called yield spread premiums.
The law firm did not agree with their findings at all.
“The day after the Center for Lending announced
its findings, Traiger & Hinckley LLP, which represents
lenders, ignited a controversy when it reported that the
new 2005 loan information from the same law, the Home
Mortgage Disclosure Act, shows that the 172 percent increase
in the amount of high-priced loans, during 2004 to 2005,
has more to do with borrowers becoming greater credit
risks than with racial discrimination.”
“First, the firm claims, borrowers are taking out
second mortgages on their homes,
reducing value and increasing their chances of defaulting.
And second, more borrowers are using a greater amount
of their incomes to repay their mortgage
debts, which makes the loans riskier.”
Both of these groups are obviously at odds on very controversial
topics. The CRL wants to protect consumers against the
lenders out there who are known to pull scams, which has
happened before in the past. The law firm wants to protect
the lenders who are practicing business in an ethical
way.
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