More on Race and the Housing Crisis, By the Numbers « The Washington Independent
A piece I wrote last week on the racial disparity in lending that occurred during the housing boom drew the kind of responses I’ve come to expect when raising questions about credit and race. Some people just don’t believe there was any discriminatory behavior in the mortgage markets, despite the fact that blacks and Latinos were far more likely to end up with high-cost subprime mortgages than white borrowers. This belief persists despite plenty of studies that have documented the disparities; the Massachusetts Attorney General in June even moved to stop foreclosures on loans made by H&R Block and its former mortgage arm, Option One, citing data showing black homeowners with the same credit scores as white borrowers end up with more abusive subprime loans. Now there’s new research out by the National Community Reinvestment Coalition that once again turns up this finding.
What’s interesting about the study released this week by the well-respected coalition of housing advocacy groups is that it documents a disturbing trend that hasn’t been fully investigated: Racial differences in lending became more pronounced as income increased. Far more middle to upper income black and Latino borrowers held high-cost loans than white borrowers of similar incomes; lower income blacks and Latinos still had more high-cost loans than whites with modest incomes, but the disparity was less significant.
The NCRC study used federal mortgage data from 2006 to examine subprime and Alt-A, or near subprime loans, in 219 metro areas. It found that in 155 of those areas, or 71.4 percent of them, middle and upper income blacks were twice or more as likely than middle to upper income white borrowers to receive high-cost loans. In 45 of the metro areas, middle to upper income Latinos were twice or more as likely to receive the high-cost loans as white borrowers.
The group explained the problem this way:
Significant levels of high-cost lending unnecessarily impede wealth building in minority communities. High-cost loans have significantly contributed to the current foreclosure crisis, wiping out hundreds of millions of dollars in mortgage equity. The overwhelming and unexplained prevalence of high-cost lending in minority communities suggests that some level of discriminatory behavior continues in the mortgage finance market, as has been shown by other studies, including those utilizing creditworthiness data conducted by NCRC, the Center for Responsible Lending and the Federal Reserve.
The top 20 areas where racial disparities were most pronounced include Milwaukee, Wis., Minneapolis and St. Paul, Minn., Huntsville, Ala., Ann Arbor, Mich., and Hartford, Conn., the study found.
Race is the unaddressed issue in the housing crisis. Reverse redlining and other discriminatory practices in lending are supposed to be illegal, and a thing of the past. The housing boom proves this not to be the case. The question now is where policymakers will go from here.