Posted on 10/16/2003 6:55:14 PM PDT by chance33_98
New Study Finds Increased Racial Disparity in Nation's Mortgage Lending
10/16/03 12:48:00 PM
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To: National Desk, Business Reporter
Contact: Valerie Coffin, 410-467-6111 Allison Conyers, 202-547-2500 both of the Association of Community Organizations for Reform Now
WASHINGTON, Oct. 16 /U.S. Newswire/ -- Today, ACORN has released a study documenting racial and economic disparities in the mortgage lending market. The report analyzes data on a national scale and in 115 metropolitan areas. Nationally, the study finds that in 2002 African American homebuyers were more than twice (2.38 times) as likely to be denied a conventional purchase loan than were white borrowers, and Latinos were rejected one and a half times (1.63 times) more often. This disparity is greater than it was in 2001, and an even bigger increase from what it was in 1997. In some cities the differences are still more dramatic.
Racial disparities remain even when controlling for income. African American and Latino borrowers are more likely to be denied credit than white borrowers in the same income category. Upper income African Americans are more likely to be rejected for conventional purchase loans than white applicants whose incomes are less than half as large.
Residents of low income neighborhoods, regardless of race, are more likely to be denied mortgage loans than residents of higher income communities. Residents of low income neighborhoods were 2.98 times more likely to be turned down for a conventional purchase loan than residents of upper income neighborhoods.
On the positive side, while minority borrowers continue to get far less than their fair share of conventional mortgages, there has been a meaningful increase in the volume of loans going to Latino borrowers, and the share of loans going to Latino borrowers is increasing.
While the national homeownership rate rose very slightly to 68.1 percent in 2002 there remains a 26.5 percentage point difference between white and African American rates of homeownership, a gap that is the same size it was last year, and only less than one half a percent smaller than it was five years ago. Hispanic families have made a little more progress, but they are still behind, and still have the lowest rates of homeownership in the country. In 2002, 74.7 percent of white families owned their own homes, compared to only 48.2 percent of African-Americans and 47.5 percent of Latinos. If minority families owned homes at the same rates as whites of similar ages and incomes, the United States would have an additional 3.2 million minority homeowners.
To decrease the lending disparities found in the report, ACORN recommends changes to the Fair Credit Reporting Act that Congress is presently considering. Other recommendations address subprime lending and increased funding for housing counseling and fair housing programs.
Additional National Findings Include:
-- African Americans comprise 13 percent of the population, but receive just 5.1 percent of conventional purchase loans. This is a slight increase from last year, but a decrease from 1997, when they received 5.5 percent of such loans.
-- Latinos comprise 12.5 percent of the U.S, population, and received 8.5 percent of purchase loans, up 13.3 percent from 2001, and an increase of 60 percent from 1997.
-- Low and moderate income neighborhoods, including people of all races, comprise 25.7 percent of the country, but receive just 11.3 percent of conventional loans.
-- Higher cost subprime lenders originated 26.37 percent of the conventional purchase loans made to African Americans, 19.96 percent of those made to Latinos, and 7.5 percent of those made to whites. About 3/4 of the total increase in conventional purchase lending to African Americans since 1997 is accounted for by subprime loans, which have default and foreclosure rates 5, 10, and even more times higher than those for 'A' loans.
"Owning a home makes a tremendous difference in families' lives, and in their futures," said ACORN president Maude Hurd. "That is why it is so important that more be done to make sure that families have a fair and equal chance to buy, and keep, a home. It is an outrage that minority borrowers continue to be denied loans so much more frequently," she continued. "Lenders need to do better, and regulators and legislators need to demand more. Progress in increased lending to Latino borrowers is a good sign that things can change - it needs to continue and to expand to include everyone who has been unfairly shut out of the American dream."
The report is available to reporters online with a password prior to the release date.
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ACORN is an acronym, and each letter should be capitalized. ACORN stands for the Association of Community Organizations for Reform Now. ACORN is the nation's largest community organization of low- and moderate-income families, with over 150,000 member families organized into 700 neighborhood chapters in 60 cities across the country. Since 1970 ACORN has taken action and won victories on issues of concern to our members. Our priorities include: better housing for first time homebuyers and tenants, living wages for low-wage workers, more investment in our communities from banks and governments, and better public schools. We achieve these goals by building community organizations that have the power to win changes -- through direct action, negotiation, legislation, and voter participation.
10/16/03
Mobile Register
In Birmingham, almost 29 percent of the 2,567 conventional loan applications made by blacks were denied. Of the 13,532 whites who applied, just under 13 percent of applications were denied.
In Baton Rouge, La., almost 38 percent of the 1,732 black applicants were denied. Of the 6,923 applications made by whites, slightly more than 14 percent were denied. Louisiana's capital city also had one of the highest percentages of conventional loans denied in low-income areas in comparison to its percentage of the city's population.
In Shreveport-Bossier City, La., a little more than 41 percent of the 765 applications for conventional home loans made by blacks were denied. Of the 4,053 applications submitted by whites, 17 percent were denied.
In Jackson, Miss., just over 38 percent of the 1,743 conventional home loan applications submitted by blacks were denied. Of the 4,396 applications made by whites, 13 percent were denied.
The problem with these types of statistics are that they're gathered and analyzed by those with the presupposition that all "differences of outcomes" between the races or different ethnicities are a result of endemic racism. These types of studies never include those statistics which may prove something other than the presupposition. Firstly, this represents poor science (i.e. you don't set out to prove your hypothesis, you set out to prove it wrong). Secondly, proving causality is actual a rather difficult thing to do (e.g. the proof of the adverse effects of second-hand smoke are bogus).
These studies never take into consideration such variables which bankers and creditors use to decide "credit-worthiness." You'll never see a comparison of such, because it just might defeat the argument they're attempting to prove. I suggest that if they want us to actually give their studies any credence in the future they will include such data. Of course this would defeat the really purpose of their studies--so don't expect that anytime soon, if ever
I saw somewhere, a couple years back, that if you look at the default rate, lenders are actually discriminating IN FAVOR OF minorities. The author speculated that it was because of fear of lawsuits.
Maybe they controlled for income --- but did they control for all other factors? Like location of the home --- neighborhood --- and all that? I know one company turned down my mortgage application because my home was too near the "colonias" even though it isn't in one. It had nothing to do with my race. To me I think they just worry whether they'll lose money.
LOL, I never heard that before, although it could be true for an FHA loan. But even then, everything is verified anyway, and I saw plenty of applications with fabricated "jobs", addresses, etc. I would be surprised if there has ever been a prosecution, let alone a conviction (forget jail), of anybody who falsified an application for a home loan.
Notice that this little comment is stuck in after the lead-in which screams "more than twice as likely to be denied." What exactly are the disparites after controlling for income? I'll that it is nothing like "more than twice as likely..."
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