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WASHINGTON (FinalCall.com) – Even as Black home ownership rates have risen, pervasive lending disparities exist throughout the mortgage industry, members of the Congressional Black Caucus (CBC) learned recently.
There is a two-tiered banking system in this country, witnesses testified June 27. Minority group members, women, and low and moderate income borrowers reside on the tier where they receive a disproportionate amount of high cost, “predatory loans” such as payday loans, and even predatory home mortgage loans, according to a new report by the National Community Reinvestment Coalition (NCRC).
“Lending markets are failing to extend fairly priced and affordable home loans to minorities, women and modest income borrowers,” Irvin Henderson, NCRC Chair told the hearing. “These are precisely the borrowers who are supposed to benefit from the Bush administration’s goal to increase home ownership and create an ownership society.”
“The number of African Americans who qualify for sub-prime (interest rate) loans more than doubled when they engaged in pre-approval programs. As a result of the administration weakening the Community Reinvestment Act (CRA), the nation’s fair lending laws are not strong enough to stop lending discrimination and increase access to safe and sound loans,” he continued.
And contrary to the conventional wisdom that “financial literacy” is protection enough against such loans, members of the CBC heard that the practice is widespread, pervasive and systemic among targeted groups.
“What is being used by financial institutions, conservative thinkers, this present administration, is that all minority groups need to have is ‘financial literacy,’” CBC member Sheila Jackson-Lee (D-Texas) told The Final Call. “It is well documented that there are severe disparities with respect to African Americans and other minorities and loans. And that African Americans are the ones who get the predominant number of predatory loans. Period. Period. And all African Americans are not suffering from a lack of financial literacy,” she concluded.
That means no matter what their profession–doctors, lawyers, etc.–if the person seeking a loan is Black, that person is five times more likely to get a negative loan than a White person, the NCRC report revealed in time for “June: Home Ownership Month.”
“The wealth gap between African Americans and Whites is growing, at exactly the time when home ownership rates among African Americans have also been climbing,” Martin Eakes, a board member at the Center for Responsible Lending, testified.
“I think what this points out is the question of not just gaining access to home ownership, but of preserving it. Of sheltering borrowers from abusive lending that would strip the equity from their homes and defeat their efforts to solidly claim a place in America’s middle class,” Mr. Eakes continued.
“We found that, even when the industry tries to be colorblind,” Mr. Henderson told The Final Call in an interview, “there are still other things that give them indications of who their borrower is. The data shows that, if the borrower is African American, they’re five times more likely to get predatory. If they are Hispanic, they’re three times more likely to get predatory. And if they’re elderly, they are 1.6 times more likely to get predatory.
“The data has shown that these are the communities that are being targeted, because of their ignorance, but also because of their profitability. These are profitable communities for the predatory lenders. We need to make it impossible in this country for a predator to survive,” insisted Mr. Henderson.