Minorities Often Pay More for Mortgages, Study Says
Feature Story by Jon Jackson - 8/14/2008
Regardless of income level, racial and ethnic minorities tend to pay more for their mortgages than Whites, according to a new study done by the National Community Reinvestment Coalition (NCRC).
In 71 percent of the 155 metro areas examined in the study, middle- and upper-income African Americans were twice as likely to receive high-cost loans then Whites in the same income brackets. High-cost, or subprime, loans are those with an interest rate significantly higher than conventional mortgages.
NCRC found that as the income level for minority borrowers increases, lending disparities also increase.
"The data reminds us that the current housing crisis was overwhelmingly the result…of bad loan products in financially vulnerable communities. It is not surprising that foreclosures have been concentrated among African Americans and Latinos, because predatory and problematic loans are most prevalent in those communities," said John Taylor, president & CEO of NCRC.
The NCRC study says that the prevalence of these high-cost loans has contributed to the current foreclosure crisis and "impedes" wealth-building in minority communities, particularly in metro areas where racial disparities in loans are most prevalent, such as Milwaukee, Minneapolis-St. Paul, and Huntsville, Ala.
The NCRC study is one of several studies that have examined the effect of race and ethnicity in lending practices.
Another report released by the Center for Responsible Lending (CRL) in May 2006 cited similar findings. For many of the types of loans CRL examined, minority borrowers were more than 30 percent more likely to receive high-rate loans than those White borrowers with identical credit scores.
