Real Estate Central

Studies show African Americans are given more costly, riskier loans
regardless of credit history or income

BALTIMORE, July 2 /PRNewswire/ — NAACP units across the country
participated in a national ‘Day of Action’ against discriminatory mortgage
lending today by demanding that several of the nation’s top lenders –
including Citi, HSBC, WaMu, GMAC and JP Morgan — make amends for
discriminating against African American borrowers and eliminate
discriminatory polices and practices for good.

According to the NAACP and its lawsuit against 17 major lenders,
African American borrowers were given loans with higher interest rates and
other poor terms solely because of their race.

The Day of Action was marked by nationwide events in more than 20
locations including New York, Chicago, Baltimore, St. Louis, Detroit, Las
Vegas, suburban Atlanta, Salt Lake City, Memphis, Seattle and southern
California. NAACP leaders, other officials and community members held
events at lending institutions and in affected neighborhoods to highlight
the pervasive and systemic discrimination against African Americans within
the mortgage industry and to demand an end to it.

“Every one of us deserves equal access to the ‘American dream’ of
homeownership,” said NAACP Interim General Counsel Angela Ciccolo. “Making
amends is just the beginning. We want to make sure African Americans are
never victimized by the lending industry again. This discrimination was
nationwide and cut across income-levels. People with six-figure incomes,
significant down-payments and who had owned several homes before were not
immune from being discriminated against because of their race.”

The NAACP filed a class action lawsuit against 17 of the nation’s
largest lenders last July for discriminatory lending practices. The
defendants are Washington Mutual, Inc., Citimortgage, Inc., HSBC Finance
Corporation, GMAC Mortgage Group, LLC, GMAC Residential Capital, J.P.
Morgan Chase & Co., Chase Bank USA NA, Fremont Investment & Loan, Option
One Mortgage Corporation, WMC Mortgage Corporation, Accredited Home
Lenders, Inc., Bear Stearns Residential Mortgage Corporation dba Encore
Credit, First Franklin Financial Corporation, National City Corporation,
First Tennessee Bank dba First Horizon National Corp., Long Beach Mortgage
Company, and Suntrust Mortgage.

“The only difference between the victims in this case and other
customers is the color of their skin,” said Brian Kabateck, who is co-lead
counsel on the suit. “They had the same credit, the same income and the
same qualifications. But because they were African American, they were
ripped off.”

Discriminatory loans are not just affecting individual borrowers, but
entire families and communities as well.

“Owning a home means much more than not paying rent. Home ownership is
the key to building the wealth that pays for college, supports retirement,
and is reinvested in communities,” said NAACP Interim President & CEO
Dennis Courtland Hayes. “Discrimination is keeping communities and the next
generation of young people from moving forward.”

Recent research, including federal data, proves the rampant
discrimination in mortgage lending:

— A July 2007 report by Freddie Mac (Federal Home Loan Mortgage
Corporation) showed that minority borrowers pay higher annual percentage
rates on mortgage loans than non-minorities with equal income and credit
risk. For instance, in 2005, African American borrowers paid an average of
128 basis points more for loans than their white counterparts. In the
subprime market, the difference was even greater — 275 basis points more.

— A 2006 Center for Responsible Lending study that found when income
and credit risk were equal, African-Americans were 31 percent to 34 percent
more likely to receive higher-rate, more expensive subprime loans than
Caucasians.

— A 2008 study by United for a Fair Economy cites federal data showing
people of color are more than three times more likely to have subprime
loans: high-cost loans account for 55% of loans to African Americans, but
only 17% of loans to Caucasians.

The study also estimated losses of between $164 billion and $213
billion for subprime loans taken by people of color during the past eight
years. This is thought to be “the greatest loss of wealth for people of
color in modern US history.”

— The National Community Reinvestment Coalition found in 2006 that
lending institutions in six major metropolitan areas were engaged in
“pervasive discriminatory and predatory practices” involving high-cost
subprime loans to African-Americans. The metro areas were: Baltimore,
Washington, Chicago, Los Angeles, St. Louis and Atlanta.

In addition to finding discrimination nationwide, the study found that
people of all income levels — not just low or middle — were victimized.
For example, the study found that in Boston, 73 percent of high income
($92,000 to $152,000 annual salary) African Americans received subprime
loans in 2005.

— The Federal Reserve Board has concluded that African Americans were
more likely to pay higher prices for mortgages than their Caucasian
counterparts. The United States Inspector General cited the Federal Reserve
Board report as showing “significant” differences, making it “clear” that
African-Americans were “much more likely to get higher-priced loans” than
Caucasians.

Founded in 1909, the NAACP is the nation’s oldest and largest civil
rights organization. Its members throughout the United States and the world
are the premier advocates for civil rights in their communities, conducting
voter mobilization and monitoring equal opportunity in the public and
private sectors.

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[Via Real Estate Newswire]