It appears discriminatory practices in mortgage lending may still be a significant issue today.
According to a joint report by seven community development advocacy groups, black and Latino homebuyers in predominantly nonwhite communities received significantly fewer conventional mortgages than white homebuyers. In fact, black and Latino borrowers in nonwhite communities were 2.1 times more likely, on average, than residents in mostly white communities to receive government-backed mortgages.
The report studied seven cities: Boston, Chicago, Cleveland, Los Angeles, New York, Charlotte, N.C., and Rochester, N.Y. Here are some of the key findings:
- Federal Housing Administration and Veterans Affairs loans accounted for 3 in 4 mortgage loans made to black borrowers and 2 in 3 loans made to Latino borrowers. This is in comparison to approximately 1 in 3 loans to white borrowers.
- Black homeowners received government-backed refinance loans 3.5 times more often than did white homeowners. Latino homeowners got government-backed refis 2.1 times more often.
- In Los Angeles, homebuyers in neighborhoods of color received FHA and VA loans five times more often than did homebuyers in predominantly white neighborhoods.
- In Rochester, N.Y., government-backed loans accounted for 86.4 percent of all mortgage loans in communities of color.
- In the seven cities combined, FHA and VA loans accounted for 74.5 percent of all home-purchase loans made to black borrowers, 66.3 percent of loans made to Latino borrowers and 35.9 percent of loans made to white borrowers.
Based on these figures, it would seem equality is not at the forefront of lending practices in these seven cities. The study outlines steps policymakers should take to ensure that, moving forward, the mortgage industry is fair:
- Ensure access to affordable mortgage loans for people and communities of color.
- Expand and enforce the Community Reinvestment Act to promote responsible lending and investment.
- Engage in vigorous fair lending enforcement.
- Hold servicers, trustees and holders of foreclosed homes accountable for maintaining the properties.
- Promptly implement Dodd-Frank's Home Mortgage Disclosure Act data enhancements at the loan level to allow identification of possible lending discrimination.
The report was prepared by the California Reinvestment Coalition, Empire Justice Center, Massachusetts Affordable Housing Alliance, Neighborhood Economic Development Advocacy Project, Ohio Fair Lending Coalition, Reinvestment Partners and Woodstock Institute.
What are your thoughts on these findings? What mortgage industry changes do you recommend?
Crissinda Ponder is an editorial intern for Bankrate. Follow her on Twitter @CrissiPonder.