Jun 2, 2008
The sub-prime mortgage crisis has led to many people losing their homes. As if that weren’t bad enough, a two-year study proves minorities were deliberately steered into the worst mortgages by brokers and lenders, even when their credit qualified them for better loans.
The investigation, from February 2004 through June of 2006, showed across-the-board discrimination against black and Hispanic applicants by mortgage brokers in the cities studied: Baltimore, Washington DC, Chicago, Los Angeles, St. Louis and Atlanta.
White, black and Hispanic individuals and couples were sent to the same mortgage companies to request mortgage loans. For purposes of the study, the black and Hispanic applicants had better income averages and better employment profiles than the white applicants in the study.
What were the results? Obvious, overt discrimination.
Ninety% of white applicants were offered fixed rate mortgages, but only 56% of minority applicants were. Fixed rate mortgages work out to less money spent each month and over the life of a mortgage.
Black and Hispanic applicants were never told about better mortgage deals, although 7% of the white shoppers were.
The mortgage lenders even spent more time on average with white applicants than with black or Hispanic applicants.
This study, funded by the Department of Housing and Urban Development (HUD), was carried out BEFORE the sub-prime mortgage crisis broke. Now that foreclosures on those sub-prime loans are going through the roof, what conclusions does HUD draw from its study? What remedies is it proposing?