Take a look at these stats:
– Latinos were 70 percent more likely and African Americans 80 percent more likely than their white counterparts to receive a subprime loan.
– African Americans were almost 20 percent more likely and Latinos were 90 percent more likely than their similarly situated white counterparts to go into foreclosure.
– Loan characteristics, especially payment-to-income ratios, adjustable rates, high-costs (subprime) and balloon payments were found to have a significant effect on loan performance.
As financial reform works its way through the Senate, the new study by the National Community Reinvestment Coalition (NCRC) indicates that subprime lending and the subsequent resulting foreclosures were promoted by the private market and contained a clear racial component not explained by objective underwriting criteria. African American and Latino borrowers were more likely to receive a subprime loan and to go into foreclosure than similarly situated white homeowners.
“Private market players from brokers to mortgage lenders to Wall Street, created a lending pipeline typified by risky, abusive and unfair practices,” says John Taylor, president and CEO of NCRC. “It is a shameful condition that borrowing while black or Latino remains a hazard in this country. Without strong regard for the risky characteristics of the products they were peddling, lenders and Wall Street chose short-term profits over fair and prudent lending. These risky products were targeted to certain communities at first, and then spread elsewhere.”
The Government Sponsored Enterprises (GSEs) did have controls in place to temper the abusive lending practices, but privately securitized loans went into foreclosure twice as often as loans backed by the GSEs. The study can be downloaded at www.ncrc.org. –gerald radford
